Once someone has arranged a whole of life insurance policy, their dependents are guaranteed the sum insured, whenever the death of the policyholder occurs. For someone who is, maybe, in their thirties now it may seem unlikely that they'll need to think about these things for several decades, but unfortunately things don't always pan out - however well you plan for them - and some cover is invaluable for peace of mind.



Because whole of life policies guarantee to pay the agreed sum at the end of a persons life, the company will always end up paying out, so premiums are more expensive than on other types of policies. Policies taken out to cover a specific period (such as the length of your mortgage) are classed as "term" and end on a specific date. Therefore there is no certainty that the insurers will ever need to pay out on them.

We are talking here about whole of life policies, however. These are investment based. Normally policyholders pay a regular amount to the insurers each month and these are used to purchase units in investment funds. The insurance company cash in these units as and when necessary to fund the guaranteed life cover.

When considering the purchase of life insurance, do make sure that you work out just what your family would need in the way of income should you not be there to provide for them Quite often the mortgage would be covered under another insurance plan, but consider the loss of your salary as well as any debts and commitments that you may leave. There would be funeral costs to consider and if the family are still dependent then there may be high costs associated with child care. No-one would want their family's standard of living to be reduced substantially by their unfortunate premature death and life insurance is particularly valuable whilst the family still needs support. As time goes on, maybe these needs would reduce until the time your partner retires or circumstances alter. Remember straightforward whole of life insurance offers you an agreed amount, which you can rely on, as long as your premiums are up to date.

It's also possible to purchase these whole of life policies as "with profits". You are offered a guaranteed minimum amount of cover on your death but each year the amount will be increased by a bonus amount. Once the bonus has been announced the final amount is permanently increased.

There are other policies available, offering a wide range of benefits within the "package". These can vary according to the particular policy but typically may include premium waiver, which means if you're unable to work, premiums will be paid, subject to conditions. There may be disability benefit, which allows the sum which you're insured for to be paid out if you are permanently disabled. Fatal accident benefit and critical illness cover - where you receive a cash amount if you become ill with certain critical illnesses - are also usually available. Premiums tend to be higher with this type of policy.

We would always advise you to take care when planning to take out insurance policies. Read and re-read the small print and make sure you understand the terminology. An independent on-line broker will offer comparisons from a wide range of insurers and give you all the advice and help that you need.