Life Insurance Guide

Moneysupermarket.com has compiled an exclusive guide to life insurance. In part four we examined the cover and additional benefits available. In part five we examine ‘whole of life’ insurance and the different types of premiums available.

‘Whole of life’ insurance

This guarantees the payout of a lump sum when the policyholder dies, at whatever time that may be as long as payments are maintained. The premiums and sum insured are guaranteed not to increase for the first ten years. However, they are more expensive as a claim is assured. These come in various forms:

• Non-profit whole life policies – A level premium payable throughout life. It pays a fixed cash sum at the time of death.
• With profit whole life policies – Same as non-profit policies but the amount paid on death is the sum assured plus whatever profits have been allocated.
• Low cost whole life policies – These have a guaranteed level of cover that the amount payable on death is greater than the basic sum plus bonuses or the guaranteed death sum assured.

Life insurance premiums

Life insurance policyholders pay premiums into a fund from which all claims are paid out. There are two types of premium available – the guaranteed and reviewable policies:

• Guaranteed Premiums – The life insurance company guarantees to never increase your policy premium.
• Reviewable Premiums – You agree that the company can review your policy at set intervals.

Initially the reviewable premiums will work out cheaper. However, over time these premiums are likely to be increased and therefore the overall cost will surpass that of the guaranteed premium. So generally, guaranteed premiums will work out as a better buy in the long run, but if you are on a tight budget the reviewable premium presents a better short-term option.
More tips on how to save money on your life insurance follow in part six.