Wednesday, January 14, 2015

What is Whole of Life Insurance?

Much like a regular term life insurance policy, a Whole of Life policy is designed to provide a sum of money (the sum assured) to someone else or to a trust upon your death. It provides an increasing level of cover which gradually builds up a cash value through to a chosen maturity date as premiums are paid. Whole of life cover is the only form of life insurance that can be paid out whilst the policy holder is still alive, if they survive past the agreed upon maturity date of the policy.

Also, whereas a term life policy covers you for a certain period of time (for instance, until the age of 65 or for a certain amount of years after you take out your policy), whole of life insurance covers you for your entire life. As such, it is generally a lot more expensive than regular term cover and has become less and less prevalent in the NZ insurance market over time. Today, few insurers here offer whole of life cover, but many policies taken out in the past are still in force and active across the country.

Whole of Life insurance is also different from other forms in that it can have aspects which function as an investment. For some whole of life policies, premiums paid are invested into a fund and can be refunded to the policy holder if performance is greater than expected. Sometimes, premiums are expected to be paid for the entire life of the policy (as long as the policy holder lives) and in other cases, the premiums cease at a certain age although the cover goes on until death. This is established when the policy is taken out, as well as the sum assured and the fixed premiums.

Whilst few providers offer whole of life policies in New Zealand these days, if you have one that is currently active and you have any questions about your policy, you can use our website's contact form to get a reply quickly and easily at anytime.

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