Whole-of-Life Plan

Life Cover with no set end-date that can be used for multiple purposes e.g. Inheritance Tax planning / Legacy Plan.

How much of your estate will go to the taxman when you die?

A Whole-of-Life Insurance policy could cover some of the tax, so that more of your estate is passed to your beneficiaries.

Would you like to leave a guaranteed legacy to your loved ones?

A Whole-of-Life Plan provides you with a guaranteed pay-out for a fixed regular premium

How it works:

  • You take out a policy on a whole-of-life basis.
  • The policy is set up under trust (a legal agreement).
  • The proceeds are then paid tax-free, outside your estate, directly to the people you wish to benefit.

Important points to consider:

  • More people can expect to pay inheritance tax in future. This is because the nil-rate threshold for inheritance tax (IHT) is £325,000, and the government has stated that the threshold will be frozen at that level until at least 2019.
  • The current rate of inheritance tax is 40% of the amount of estate above the nil-rate threshold. If the value of your estate is more than £325,000, the total tax payable can add up to a significant amount.

Further Information on Whole-of-Life Plans

  1. A means of making sure you leave a legacy when you die
  2. As a lower-cost funding alternative to pay your inheritance tax

It's also possible to create a plan for both of these purposes.

In days gone by, people looked forward to retiring by age 65, enjoying a retirement of maybe 10 to 15 years and leaving a legacy. Usually, this legacy would mostly consist of the value of their home.

But much has changed over recent years:

  • Retirement will be later in the future and less certain.
  • Many can now expect to live well into their 80s or 90s.
  • Living with chronic health conditions is more likely, as is the need for residential and/or nursing home care.
  • In larger families (where there could be several beneficiaries with spouses) family structures can be more complicated – which can lead to problems regarding who gets what!

A Whole-of-Life Plan can be used to ensure that you are able to leave a legacy to the beneficiaries of your choice, whatever the future brings.

Whole-of-Life Insurance provides a lower cost alternative way of meeting a future inheritance tax obligation – and the savings can be very significant.

Imagine a couple (both aged 60) with a potential future inheritance tax bill of £100,000.

  • Instead of doing nothing and paying the £100,000 inheritance tax bill from their estate when they have both died, they decide to take out a Whole-of-Life Plan today.
  • They choose a plan which guarantees to pay out £100,000 when they have both died, at a cost of £100.01 per month. 
  • The Whole-of-Life Plan would be written under trust. Setting up the plan under trust means that when the policy pays out, the money does not form part of their estate – and therefore does not increase the amount of inheritance tax payable.
  • When both of the couple have died, the proceeds are then paid tax-free, outside their estate, directly to the people they wish to benefit.
  • The total potential saving depends on the amount of premiums paid between starting the insurance plan and the end of the plan. However, even if the last remaining partner died at the age of 100, the total saving would be significant. This is because the total amount of premiums paid by then would still be less than half the amount the policy would pay out (£100,000). In fact, one of the couple would need to live to the age of 143 in order to have paid more in premiums than the policy actually paid out!

Note:  The value of your estate could increase or decrease in the future and the rate of inheritance tax and nil rate band are subject to change.

It's important to make sure that the plan you take out matches your requirements.

At Moneysworth, we only arrange Whole-of-Life Insurance on a guaranteed premium basis.

The benefits are:

  • Your premiums are NOT reviewable
  • Your premiums are NOT dependent on investment performance.

We believe that this type of plan is reliable and 'does what it says on the tin' – you will never be asked to pay more.

However, not all plans available elsewhere in the market meet these criteria.

Some people with reviewable plans have been faced with a nasty shock at their policy review date, when they have been asked to pay significantly higher premiums to maintain cover levels until the next review date (when they might be asked to pay even more).

Please speak to us if you would like more information about the different options available to you.

The example premiums below are based on non-smoker rates and were sourced on 1st Apr 2014

Joint cover (payable on second death) - monthly premium examples:

Age of joint applicants
at start date
55 60 65 70
Monthly premium £79.60 £100.43 £134.65 £185.16
Amount of cover £100,000 £100,000 £100,000 £100,000
If second person dies at age 75 Total premium paid £19,104 £18,077 £16,158 £11,110
Profit £80,896 £81,923 £83,842 £88,604
If second person dies at age 85 Total premium paid £28,656 £30,129 £32,316 £33,329
Profit £71,344 £69,871 £67,684 £66,671
If second person dies at age 95 Total premium paid £38,208 £42,181 £48,474 £55,548
Profit £61,792 £57,819 £51,526 £44,452

Individual cover - monthly premium examples:

Age of applicant
at start date
55 60 65 70
Monthly premium £113.50 £149.80 £213.90 £292.16
Amount of cover £100,000 £100,000 £100,000 £100,000
If applicant dies at age 75 Total premium paid £27,240 £26,964 £25,668 £17,530
Profit £72,760 £73,036 £74,332 £82,470
If applicant dies at age 85 Total premium paid £40,860 £44,940 £51,336 £52,589
Profit £59,140 £55,060 £48,664 £47,411
If applicant dies at age 95 Total premium paid £54,480 £62,916 £77,004 £87,648
Profit £45,520 £37,084 £22,996 £12,352

The above example premiums are for illustration purposes only. Any terms offered would be subject to underwriting.

If you have any health conditions, take a look at the Life Insurance for people with Health Conditions section.

Moneysworth logo

We don't charge you a fee

If you start a policy, we will be paid a commission by the insurance company. The insurance company will usually pay for any doctor's fees if reports are required.

Did you know?

According to a 2013 study by Herefordshire County Council:

121 weeks
was the average length of stay in long-term residential and nursing care in 2011/2012
.

The average cost of a residential home is £580 per week and £700 per week in a nursing home.
This represents a drain on the client's assets of as much as
£84,700
…and possibly much more if they have a longer stay in a home.