Seven Things To Know About Whole Of Life Unit Linked Cover

There have been many reports recently of Whole of Life unit linked policy holders who have recently been told that their premium will be increasing in order to maintain the level of cover on the policy.

These policies date as far back as the 1970s for some people, and continued to be quite popular up until the late 90s/early 00s.

Here are seven things you need to know about whole of life unit linked cover to help you ascertain if this is the type of policy you currently have.

WHAT DOES ‘WHOLE OF LIFE’ COVER MEAN?

This particular cover is referred to as Whole of Life cover, but depending on the provider, it can have a different product name. If the policy booklet or documents mention that it is ‘unit linked’, this means this is the type of cover that they have been referring to lately.

WHAT AM I PAYING FOR?

This type of cover is for the lifetime of the policy holder, and a small portion of the premium you pay monthly is invested in a fund which could lead to a small encashment value on termination of the policy. The higher the encashment value the more of a chance there would be little or no increase at future reviews. However the fund value was never guaranteed to grow, and due to steady decline in interest rates from the late 90s onwards and the global recession in 2008, this affected these fund values negatively.

WHAT’S CHANGED?

Many of the policies were sold based on the With Profit fund, which grew by annual bonuses declared by the life companies. This fund also performed well based on high interest rates, which was the case back in the 80s & 90s. Mortgage interest rates were tracking about 12/14%, but they have gradually dropped over the years which led also to a drop in the bonuses declared by the life companies.

WHAT WILL HAPPEN IF I CANCEL THIS COVER?

Cancelling this whole of life cover and moving to a Level Term policy will mean that your policy has a term, and after the term is up the policy will expire. You will also be fully underwritten medically for any new policy you apply for.

WHAT DOES A COVER REVIEW ENTAIL?

When a review is carried out, the life company reviews the risk on the policy based on your current age. The majority of these policies have T&Cs stating that a policy is reviewed after the first 10 years and every 5 years after that, and then every year at age 70. You may have had reviews before, but never realised whether an increase was minimal or not required. If you have not taken up any small increases in premiums in past reviews this will only negatively affect any further reviews coming down the line.

FIND OUT MORE ABOUT THIS COVER

Although there were some risks associated with this type of cover there are also some risks if you are now thinking of cancelling your ‘whole of life’ cover and replacing it with any other policy you may be eligible for.

The Chill team is on hand to help or answer any questions.. If you were one of the many whole of life unit linked policy holders who recently received your review, don’t hesitate to contact us if you need alternative cover options and we will do our best to help you.