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A Whole of Life policy does exactly what is says, covering you for the whole of your life. When the inevitable happens, providing the policy is still in force, it will pay out a death benefit. Although they can provide a surrender value, they should not be used for investment purposes due to the deductions made for the death benefit.
As payment of the benefit is inevitable, Whole of Life policies tend to be more expensive than Term Assurance policies for the same level of cover (depending what age you are when you start the plan). Each premium is made up of a mortality element and a savings element. The savings element could build up an investment fund to pay out the benefit on death. The performance of the underlying investment fund for Whole of Life plans is important, as the cost of future premiums depends on fund performance.
The premiums and sums assured are guaranteed not to increase for the first ten years. However, they are more expensive as a claim is assured.
These policies come in various forms:
If you are worried about the investment risk and increasing premiums, there are Whole of Life policies available which don’t rely on fund performance, however, these do not acquire a surrender value.
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