One of the main benefits of a whole of life assurance policy is that it guarantees a lump sum payout when the life assured dies, whenever that may be.
Once a plan has been accepted by the provider, as long as the premiums have been paid in accordance with the policy terms, cover is always in place.
Because a payout on death is guaranteed, this type of life insurance plan is generally more expensive than basic term life insurance.
The guarantee of an eventual payout makes these plans attractive for use in estate planning as a tool to pay a potential future inheritance tax liability. If you intend to use a plan like this for IHT planning purposes it is important to put them in to trust for specific beneficiaries otherwise the benefits paid may do nothing more than increase the amount of tax your beneficiaries will be expected to pay.
Whole of life assurance plans are also used in business financial planning matters. Most predominately to provide a lump sum for the surviving partners or shareholders to pass on to the deceased business owners estate. The amount paid to the deceased Partners or Director's fellow share holders is normally in relation to the monetary value of his or her's share of the business. This type of planning helps to ensure that the surviving business partners can pay off their deceased partners beneficiaries without the need to sell part or all of the business to raise the funds.
If you plan to use a whole of life policy for business purposes then you should be aware the policy could incur a charge to corporation charge.
The cost of whole of life insurance varies from person to person. The premium you pay will normally be linked to your age, health and occupation.
As with all policies it's crucial you keep up the regular premium payments to keep cover in place.