Whole life insurance plan
What is a whole life insurance plan?
A whole life insurance plan is one of the two most popular forms of life insurance, and is available to all residents in the UK. The whole life insurance plan policy will pay out a lump sum payment to the family of a customer who dies having taking out a whole life insurance plan.
The other main form of life insurance is term life insurance, and this is the cheaper and more popular form of life insurance. Term life insurance is offered over a certain term, which is usually the term of a mortgage, and is rarely offered to a customer beyond their 60th or 70th birthday.
Term life insurance customers risk paying out for a policy throughout their lives, only to die a few months after their policy ends, leaving their families with nothing. This is why a whole life insurance plan is popular.
How does a whole life insurance plan work?
A whole life insurance plan is actually one of the simplest forms of life insurance. A customer who signs up to a whole life insurance plan will pay a premium monthly for a fixed number of years. When the customer dies, at whatever age that is, the customer’s family will be paid lump sum payments.
A whole life insurance plan is therefore far more expensive than term life insurance, because the insurance company always have to pay out on a policy eventually. Therefore they must recoup at least the pay out in premium payments throughout the life of the whole life insurance plan to make any profit at all.
Later on in life, when a customer’s financial responsibilities have diminished and their families need for a life insurance payout has reduced, a whole life insurance plan customer is able to start borrowing money against their final payout, which they can use to pay for luxury holidays, home improvements, or to give to children or grand children as they see fit.
Why should I take out life insurance?
It’s important to have life insurance if you have any financial responsibilities at all, including a young family or a mortgage. If your income would be missed if you died tomorrow, then life insurance can at least make up financially for your loss, and help your family deal with their grief at a difficult time by not having to worry about money.