Using a whole of life policy to leave a financial legacy
We all know the UK population is ageing. In fact, the Office for National Statistics (ONS) projects more than 24% of people living in the UK will be aged 65 or older by 2042, a projection that has increased from 18% in 2016.
ONS statistics also show the proportion of the population aged 85 years and over is projected to almost double over the next 25 years.
Planning for the unknown
Planning for your finances in later life isn’t straightforward, as you never know what’s going to happen in the future. Is it a good idea to plan for long-term care costs if you don’t know whether you will ever need to pay for care?
It is always best to prepare for the unexpected. For example, avoiding the need to draw on savings and investments in later life to meet care costs. Which in turn raises another worry that there is less money to leave as a legacy.
whole of life policy
One solution is to take out a Whole of Life policy. This does exactly what it says, by providing life cover that lasts a lifetime. Unlike term assurance which only pays out if you die during a set period of time.
Premiums are normally paid each month (some companies offer single premium plans) and in return you have life cover for a set amount (sum assured). Some policies also allow you to stop paying premiums at a certain age, whilst cover remains in place, which can be useful for later life planning as you know the maximum time you will be paying premiums for.
protecting your legacy
Because you know the whole of life policy will only pay out on death. You can direct the policy proceeds to the people you want to benefit, by putting the policy in a suitable trust.
This also has the advantage of taking the policy proceeds outside your estate for Inheritance Tax purposes, so you leave more of your estate to the people who mean the most.
What will it cost?
Your monthly premiums will depend on factors including; your age, health, the amount of life cover required and who provides the life cover.
Some companies offer non-medical life insurance which can be attractive if you are over 50, but the pay-out will normally be reduced to a refund of premiums, rather than the full sum assured, if you were to die during the first couple of years.
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