Whole of Life (WOL) Cover

A Whole of Life Assurance policy promises payment of a known level of cover upon death of the life/lives assured upon their death, provided premiums have been maintained up to that point. As they are guaranteed to pay out at some point, provided they remain in force, the sum assured amount is typically much smaller than with life insurance, and so are used to cover lesser expenses such as funeral costs, or to leave a monetary gift to a child or grandchild.

Premiums and the sum assured are fixed throughout the life of the policy, although in some cases it is possible to include an annual increase in the amount of life cover to safeguard against inflation. This would however mean that the premium also increases each year.

Some companies offer guaranteed or fixed premiums, whilst other plans reserve the right to review premium levels on a periodic basis. There is usually a small additional cost for the advantage of a guaranteed premium but with the assurance of knowing what future premiums will be.

Premiums are based on personal circumstances but the main areas for consideration by an insurer are age and state of health. The older a person is, the higher the premium will be. Similarly, if someone has you have or had a serious ailment the insurer may seek to charge you more or in some cases be unwilling to cover you at all. Higher levels of cover and longer policy terms all increase cost as will the fact that an individual smokes.

This type of policy only provides cover in the event of death and/or diagnosis of a terminal illness, so there is no surrender value nor investment element. If the policyholder stops paying the premiums at any time, cover will cease; normally after three missed payments.

Applicants would have to be aged 18 or over to take out such a policy, and all proceeds upon a payout would be free of income tax and capital gains tax.