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Guide to Whole of Life Assurance

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					Guide to Whole of Life Assurance
Is Whole of Life Assurance Value For Money?
Whole of Life assurance lasts for the whole of your life; it is the only type of life assurance that guarantees that
you cannot outlive the term.

What’s it for?
People buy life assurance for a variety of reasons, to repay a mortgage on death, to provide cash to help your
partner raise your children, or simply to take care of your funeral expenses. Further down this guide we go on to
outline the growing costs of long term care for the elderly and the chances that this may affect you.

For many customers term life insurance can appear to be a waste of money as they don’t (of course) intend to die
during the term. Whole of Life is fundamentally different as it will eventually pay-out.

Is it value for money?
Of course Life Assurance will payout if you die prematurely through accident or through a serious illness, but what
if you lead a full and healthy life to a natural old age. By this time you will have enjoyed the “peace of mind” that
life assurance protection will provide, but what do the financials look like?

This table shows that many people can get more out than they pay in.

                                       Whole of Life Assurance for £65,000
Male, Non-smoker
                   Monthly
   Age at outset                 Total Paid In By Age        Amount Paid Out On Death      Paid Out Less Premiums Paid
                   Premium
                                74         84       94        74        84        94         74        84         94
        34          £15.55    £7,464     £9,330   £11,196   £65,000   £65,000   £65,000    £57,536   £55,670   £53,804
        44          £29.62   £10,663    £14,218   £17,772   £65,000   £65,000   £65,000    £54,337   £50,782   £47,228
        54          £65.94   £15,826    £23,738   £31,651   £65,000   £65,000   £65,000    £49,174   £41,262   £33,349
        64         £140.98   £16,918    £33,835   £50,753   £65,000   £65,000   £65,000    £48,082   £31,165   £14,247
        74         £274.22     n/a      £32,906   £65,813   £65,000   £65,000   £65,000      n/a     £32,094    -£813

Male, Smoker
                   Monthly
   Age at outset                 Total Paid In By Age        Amount Paid Out On Death      Paid Out Less Premiums Paid
                   Premium
                               74         84        94        74        84        94         74        84          94
        34          £30.89   £14,827    £18,534   £22,241   £65,000   £65,000   £65,000    £50,173   £46,466    £42,759
        44          £58.06   £20,902    £27,869   £34,836   £65,000   £65,000   £65,000    £44,098   £37,131    £30,164
        54         £117.55   £28,212    £42,318   £56,424   £65,000   £65,000   £65,000    £36,788   £22,682     £8,576
        64         £221.03   £26,524    £53,047   £79,571   £65,000   £65,000   £65,000    £38,476   £11,953   -£14,571
        74         £407.38     n/a      £48,886   £97,771   £65,000   £65,000   £65,000      n/a     £16,114   -£32,771


Long Term Care Costs and Whole of Life Assurance
 “A quarter of people aged 65 will need to spend very little on care over the rest of their lives. Half can expect care
costs of up to £20,000, but one in 10 can expect costs of over £100,000. Some could spend hundreds of
thousands of pounds.” (Reference: http://www.dilnotcommission.dh.gov.uk/our-report/) the Dilnot report.




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A costly old age erodes estates
The Dilnot report states that 3 out of 4 adults should expect a period of long term care before they die, and when
they do move into long term care then they should expect a costly, estate eroding, experience.

Furthermore research shows that while approximately 130,000 new individuals enter care homes each year, only
around 53,000 of these will fund their care themselves.

This staggering statistic means that 59% of people moving into care already have estates worth less than the
means tested threshold of £23,250.

For people who do move into domiciliary care, the data shows that they are likely to stay in care for around 800
days and that during that time they will have depleted their estates by around £65,000.

Whole of Life Assurance Can Help You
There is much uncertainty about the costs and the rules for entitlement to long term care in the UK. One thing is
for certain, and that’s that there will be increasing numbers of elderly people requiring care which one way or
another will need to be paid for.

If your estate is eroded by long term care costs but you have a cash pay-out from a Whole of Life Assurance on
death then this pay-out can effectively replace a proportion of the estate value used to pay for your care.
Furthermore if in the meantime you die prematurely or without needing care, the entire sum assured is passed to
your dependants (if you use a suitable Trust).

Trading In-Force Life Assurance Policies
Finally, although it doesn’t exist in the UK today (but it does in the USA), there is the possibility that a market in
trading in-force life insurance for those that have become ill may be created in the future.

This would mean that someone nearing the end of their life may be able to sell their policy for lower than the face
value at death, in order that the payment may be accelerated and be made during their lifetime. If such a market
is created then guaranteed premium Whole of Life Assurance is likely to be the most valuable.

If you have any queries on the issues raised in this guide or would like further information please contact
Michael.Ward@payingtoomuch.com.

Thank you for considering payingtoomuch.com in your financial plans.




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posted:8/24/2012
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