What Is A Whole Of Life Plan?

When it comes to planning your life insurance, knowing where to start can often be the hardest part. Understanding the distinct types of policies and coverage options available can make it significantly easier to find a plan tailored to your unique financial circumstances and needs. One option you may have come across is a Whole of Life Plan. 

Unlike certain types of life insurance, which primarily cover a fixed period, whole of life insurance is designed to provide cover throughout your lifetime, ensuring you meet the required policy terms and conditions and pay any premiums as and when required. In short, a Whole of Life Plan provides reassurance with a guaranteed lump sum when you die. 

Throughout this guide, we will discuss what goes into a whole of life policy, how it works, and simple ways to get started to gain the reassurance that your loved ones will be covered when they need it most. 

What Is A Whole of Life Plan? 

A whole of life plan is a type of life insurance designed to pay out a guaranteed amount when the policyholder dies, subject to the terms and conditions of the policy. 

The main difference between a whole of life policy and a life insurance policy is the length of the cover provided. With life insurance, the term typically protects for an agreed period, such as 10, 20, or 30 years. If you die during that period, the policy will pay out to your loved ones according to the agreed terms, while a whole of life plan is intended to continue throughout your entire lifetime. 

At Sheffield Mutual, we offer a whole of life plan with a guaranteed fixed amount payment upon your death, provided the required premiums are maintained. The plan is designed as a protection policy, meaning it does not participate in the profits of the Society’s investment fund and therefore will not have a surrender or maturity value. 

How Does Whole of Life Insurance Work? 

The basic principle behind a whole of life insurance policy is relatively straightforward. For example:

• You take out a policy and agree to pay a regular premium. 
• Once you decide on the amount you would like to pay, we will provide a quote showing the potential payout upon your death.

The amount you pay and the amount of cover you receive can depend on factors such as your age, lifestyle and your health when you apply for your cover. At Sheffield Mutual, we offer policies between £5 and £50 a month. This premium will not change during the policy’s lifetime, with the maximum sum assured being £50,000. To receive the full guaranteed sum assured, however, premiums must generally be continued until death, or at least until the policyholder reaches the age of 90. 

A whole of life plan is a long-term financial commitment, so you should consider whether premiums are affordable for you now and in the future. 

What Does Sum Assured Mean? 

‘Sum assured’ is a term often used when discussing whole of life policies. In short, sum assured is the guaranteed amount the policy will pay when you die, provided the claim is still valid and the policy conditions have been met. 

The amount paid depends on the specific policy you choose, your age, and other relevant circumstances. Typically, the younger you are when you begin your policy, the greater the potential sum assured may be, though this may depend on individual circumstances. 

At Sheffield Mutual, we create a sum assured up to £50,000. To see for yourself how much you could accumulate, use our quote calculator. 

What Can A Whole of Life Plan Be Used For? 

One of the main advantages of a whole of life plan is that it will leave a financial legacy behind for your loved ones. The accumulated lump sum could then be used for a variety of purposes, including: 

• Helping towards funeral expenses. 
• Leaving a gift for loved ones. 
• Helping to manage unexpected costs. 
• Providing financial support. 
• Contributing towards outstanding costs. 

Many people choose to use their whole of life plan to pay for funeral expenses after their passing, reducing the financial pressure on loved ones during an already difficult time, while others may use it to ensure all outstanding payments are made for similar reasons. 

Who Can Take Out A Whole of Life Plan?

Eligibility for a whole of life plan can vary depending on the policy and the provider. For example, at Sheffield Mutual, applicants for our whole of life plan must be UK residents and between 16 and 70 on their next birthday. Applicants must be in sound health when applying, as confirmed with a medical questionnaire. 

The health and lifestyle information you provide can be important in ensuring you get the best cover available. As with any financial product, it is important to ensure that all information provided is completely accurate. 

Can You Have More Than One Whole of Life Plan? 

At Sheffield Mutual, policyholders can take out an additional whole of life plan, provided the combined monthly premiums do not exceed £50, and the total cover does not exceed £50,000. However, this may vary by provider. Any additional plans must also be taken out before the policyholder’s 70th birthday. 

Although it is possible to have more than one policy, this does not necessarily mean it is right for everyone. It can, however, be useful to structure cover differently or increase the final amount of financial support accumulated. 

How Long Does A Whole of Life Policy Last? 

As the name suggests, the plan is designed to provide cover for your entire life, rather than for a specific fixed term. However, this does not mean that you can stop paying premiums at any point and still retain the same level of cover. 

For example, at Sheffield Mutual, the minimum premium-paying period is 10 years. To receive the full guaranteed sum assured, premiums must be paid throughout your lifetime, or until you reach the age of 90. After the minimum 10 years, you may be able to stop paying premiums; however, the policy becomes ‘paid up ’, and a reduced amount would therefore be payable upon death. 

If you stop paying premiums within those first 10 years, the plan will lapse without any value, so it is incredibly important to consider this. 

Depending on how long you live for, you could pay more than is paid out. 

What Are The Main Benefits Of A Whole of Life Plan? 

There are several benefits to having a whole of life plan, including: 

Long-term protection: 

Unlike a standard life insurance policy, a whole of life plan stands up to its name and provides cover for your entire life until death. This makes the plan well suited to those who want to leave a financial legacy, no matter when they die. 

Guaranteed pay out: 

Arguably one of the main benefits of a whole of life plan is that you are guaranteed a lump sum, as long as the required premiums and policies are continued to be met. 

Affordable monthly payments: 

Sheffield Mutual’s Whole Of Life plan can start coverage at just £5 a month, making it much more affordable. 

Support towards funeral costs:

The payout received upon your death can help your loved ones cover funeral expenses and other costs, reducing financial pressure at a difficult time. 

Is Whole of Life Insurance Tax-Free? 

At Sheffield Mutual, we ensure that all lump-sum payments are free from personal income tax and capital gains tax. However, if the payment forms part of the policyholder’s estate, then it may be subject to inheritance tax. 

If you are unsure about the tax implications of inheritance tax or estate planning, consider seeking professional financial advice before starting your cover. 

Is A Whole of Life Plan Right For You? 

Whether a whole of life plan is right for you ultimately depends on your financial circumstances, goals and priorities. 

If you want to leave a guaranteed lump sum for your loved ones, help towards funeral costs, or create a financial legacy upon your death, then a whole of life plan could be the right choice for you. However, it is important to consider your options, including how long you wish to pay premiums, how long you expect the policy to remain in force, and how much cover your family may need. 

Always ensure you fully understand the policy terms, including commitments and what happens if payments stop. If you are unsure of any information regarding your financial situation, speaking to a qualified financial advisor can ensure that you know exactly what you are looking for. 

If you are ready to begin your Whole Of Life plan, contact us today to find out more or get a quote to see how much you could leave as a financial legacy for your loved ones. 

This article provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has provided no advice. If you doubt whether a savings or investment plan suits you, consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.