Whole of life policies written on a non profit basis give a guaranteed sum assured payable on death. As with other forms of whole of life policies, premium payments may cease at an earlier age, say 80 or 85, with the life cover continuing. Very few non profit policies are marketed nowadays, as they are perceived to be poor value compared to with profit or unit linked contracts, particularly since the removal of life assurance premium relief for policies issued on or after 14th March 1984.
Unlike term assurance, it is a certainty that these policies will have to pay out. There is an investment element within the premium. After an initial period, a surrender value will build up, giving the policyholder additional options encashment, policy loan, or making the policy paid-up.
Although a cash value will build up, whole of life policies are unsuitable for savings purposes. There will be little or no surrender value payable for at least two years. For a number of years after that time the surrender value will almost always be less than the amount of premium paid.
There are several types of whole of life policies – non-profits, with profits, low cost and unit linked. Plans will allow the inclusion of critical illness cover as the likelihood of a critical illness claim significantly increases when the cover is whole of life. Critical illness insurance is a benefit that can be either free standing or in the case of whole of life insurance a "bolt on benefit".
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