Finding the right life insurance

Term provides cover for a certain time and is designed to protect your dependants if you die prematurely. These policies are normally taken out to protect the family, and the length of the term coincides with the years your family will be most financially vulnerable.

Whole of life insurance differs from term in that so long as you pay the premiums the plan will remain in force for the whole of the insured’s lifetime, with the plan paying out when you die.

Overall this market has been thriving in the past few years but is a market of two halves, with the first half comprising of the guaranteed acceptance whole of life plan.

These plans are often sold off the page or through TV advertising for over 50s who want to leave a small legacy or pay for funeral costs. They are popular because of the guaranteed acceptance they give after a qualifying period with no medicals required. However, if you are in good health, in my opinion, you should seek out the second half of the whole of life market that comprises of medically underwritten policies. For the same premium these plans will pay out significantly more if you die, because you have opted out of the one size fits all plan that takes into account some people having health issues at outset.

The guaranteed acceptance market has been very successful in the last few years with the average policy size being £3,526, but the number of policies sold has fallen by 1.2 per cent in the last year.

Whereas basic underwritten whole of life plans have seen a resurgence with the average policy being £102,885, and a 13.8 per cent increase in polices sold over the last year.

The reasons for this increase may be that healthy people are seeking better value than the guaranteed acceptance plan, but also as people generally get wealthier they are insuring more against possible inheritance tax liabilities.

Although it is possible to mitigate inheritance tax in other ways, one of the simplest ways is to buy a policy if you wish to keep hold of your assets.

Another reason for buying this product could include wanting to provide an income for a surviving spouse or perhaps a lump sum for other members of the family.

Overall I think that medically underwritten whole of life plans are worth considering for many families with estates to protect.

As this is a complex area it is worth taking advice from a chartered independent financial planner to help you make an informed decision on this matter.