A whole-of-life assurance plan literally provides cover for a lifetime, paying out the sum assured on death, assuming, of course, the policy is in force at the time.
Sometimes, for whatever reason, cover is only required for a set period of years. Term assurance can also be set to run until a specific age has been reached, such as retirement age. Whatever the limit, the minimum fixed term is usually 10 years.
Depending on circumstances, term assurance may or may not pay out. Whole-of-life assurance, on the other hand, will pay out at some point (on the death of the life assured).
Because of this certainty, life assurance companies build up a reserve to meet the payout.
But this also enables them to offer a surrender value if the whole-of-life policy is cancelled before the death of the life assured.
The surrender value often falls short of the total amount of premiums paid, especially if the policy has been running for only a few years, underlining the fact whole-of-life assurance is for protection and not for investment.
Whole-of-life assurance comes in a variety of flavours, including non-profit, with-profit, unit-linked, unitised with-profit, low-cost, flexible and universal.
Click on the links in the menu for a short explanation of each.
