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Whole of life

Whole of life cover pays out a lump sum in the event of death, no matter when it happens. There is no specified period. Whole of life policies are generally used to provide security for a family, and are especially suitable for Inheritance Tax Planning.

The most common policies are unit-linked, which means the premiums you pay each month are paid into an investment reserve. This reserve is put into investment funds chosen by the client and is professionally managed to achieve the best possible return.

Part of the investment is taken monthly to pay for your life cover. Such policies are usually written on one of two bases:

Maximum Cover
Maximum cover offers a high initial level of cover for a low premium, until the first plan review which is normally after ten years. The low premium is achieved because very little of your premium is kept back for investment - most of it is used to pay for the life cover.
After review (described below) you'll probably have to greatly increase your premiums to keep the same level of cover, depending on how well the cash in the investment reserve has performed. The better it has performed, the less premiums are likely to rise.

Standard Cover
This cover balances the level of life insurance with adequate investment, to support the policy in later years. Standard cover maintains the original premium throughout the life of the policy. However, this relies on the value of units invested in the underlying fund growing at a certain level each year. Increased charges or poor performance of the fund could mean you'll have to increase your monthly premium to keep the same level of cover.

The level of protection selected will normally be guaranteed for the first 10 years, at which point it will be reviewed to see how much protection can be provided in the future. If the review shows that the same level of protection can be carried on it will be guaranteed to the next review date.
If the review reveals that the same level of protection can't continue you'll have two choices;

• Increase your payments
• Keep your payments the same and reduce your level of protection

Now you've got a bit more information about life assurance cover and the other variations. let's recap on the questions you're likely to be asked before you take out your policy:

• Your age
• Your gender
• If you smoke
• How much alcohol you drink
• Your past and current medical conditions (very important as an insurance provider can refuse to pay out if you don't disclose this)
• If you have a risky occupation or take part in risky sports (AGAIN very important as an insurance provider can refuse to pay out if you don't disclose this)

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