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Why Whole of Life should no longer be ignored

Published 18/05/2022

Whole of Life might not get the same airtime as its more popular sibling Term Life, but advisers should still give it the attention it deserves.

For advisers discussing life insurance with clients, cost can be a barrier - at the best of times - even if that plan is guaranteed to last their entire lifetime. Gone are the days when life insurance was envisioned purely as a form of savings paid as a death benefit. Propositions have evolved to deliver value to clients while they are still alive, meaning that protection advice has needed to become far less transactional as a result.

But, with people living longer, Whole of Life still has an important role to play as part of protection recommendations. While sales were much higher in the '90s and early noughties, its demand has remained steady in recent years, according to industry data. In 2020, 11,000 advised underwritten Whole of Life plans were sold, down 66% from the high watermark of 33,000 in 2015. However, the number of guaranteed acceptance plans purchased in 2020 was up 16% on 20151.

While it might be more common for advisers to turn to a combination of Term Life, Serious Illness Cover and/or Income Protection when looking at solutions for clients - especially at a time when budgets are constrained - there are a number of reasons why Whole of Life should not be overlooked.

1. The plan is guaranteed to pay out

Providing all underwriting questions are answered honestly at application stage and premiums are paid, Whole of Life Cover is the only protection policy that is guaranteed to pay out. However, it is widely accepted that a client should not be asked to pay premiums for an amount that’s likely to outweigh their needs as they enter later life. For example, the amount of protection needed to cover a mortgage tends to decrease over time as repayments are made. But even after a mortgage is paid off, clients are likely to encounter a range of protection needs beyond retirement, such as funeral costs, inheritance tax (IHT) and to safeguard their wealth for the next generation. For this reason, financial advisers can recommend Whole of Life – perhaps alongside a Term Life plan - to ensure cover stays in place beyond a set period. 

2. Funerals are becoming more expensive

With the average costs for a basic funeral sitting at just over £4,000 and those involving a headstone, flowers and a wake costing closer to £9000 in the UK2, it’s no surprise that clients are often keen to ensure family members left behind are not out of pocket. Research suggests that one in five families now choose a budget cremation for their loved ones3. The price of direct cremations without a service soared 6% in 2021 and funeral costs across the board predicted to rise in the coming years. By allocating even just a portion of an overall protection recommendation to Whole of Life, you can make sure this is covered.

3. Equity release is becoming more popular

The UK saw 76,154 people use Equity Release in 2021 (up 4%) for an average lump sum of around £125,0004. Typically, it is being used to boost retirement income, fund home improvements, release inheritance early and fund holidays and expensive purchases. However, because the loan – taken as collateral from property value - must be paid back before a home can be sold, there is a good chance any financial legacy being left for loved ones could be eroded. To prevent this, a Whole of Life plan - put in place early enough - would serve as a viable way to protect a family’s future wealth for generations to come.

4. IHT receipts are on the rise

Inheritance tax receipts continue to grow year on year. In 2011 they were £2.7bn compared to £5.32bn in 20215. As inflation continues to rise alongside the frozen lifetime allowance and increasing property prices, people are more likely to be pushed into higher tax brackets or breach IHT thresholds. Adding to this, the tax – amounting to 40% on assets above allowances - must be paid within six months after death. Having a Whole of Life plan in place, written into trust, is a way to ensure beneficiaries can access to the full value of an estate.

5. Social care funding is still a huge problem in the UK

It’s no secret that the provision of the later life care in the UK is still a big concern. Even despite the recent National Insurance levy brought in to help fund it, financial advisers still have an important role to play. One in three people born today will develop some form of dementia, which typically creates worth of £100,000 care per person. The number of dementia sufferers are expected to reach 1.6 million in the UK by 2040 and only 11% of British people are making provision for later life care costs, according to research6. By offering your clients the option to add LifestyleCare Cover to Whole of Life Cover, they can cover themselves for conditions like Alzheimer’s and Parkinson’s. This could be used to remove financial pressure on those closest to them should there be a need to fund later life care.

Find out more about how you can support your clients with Whole of Life Cover.

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Swiss Re Term & Health Watch 2021
2. Sun Life research 2021
This is Money, 27 January 2022
According to Equity Release Council, Mortgage Strategy, January 2022
IHT Statistics: Commentary, HM Revenue & Customers, July 2021
Alzheimer's Society, August 2021