What do a professional couple with a young family and a retired tycoon have in common? They can both use a whole of life product for a variety of needs. Jennifer Gilchrist explains.
It would be tragic for parents to see everything they had worked so hard for and hoped to pass on to their children disappear. Taking out a whole of life plan earlier in life written under trust could replace all the lost inheritance that care fees could take away.
The house would still have to be sold and care fees still paid but at least there would be an inheritance for the children after their parents had passed away.
Some whole of life products cover business needs as well as personal needs.
Business owners can use whole of life to protect their businesses in the event of their untimely death. A whole of life plan can, for example, protect a loan or provide a lump sum to allow the client’s business partners to purchase his or her share of the business from the surviving spouse or partner.
Some plans are flexible enough to allow business users to increase the benefit amount within defined limits without further medical evidence if, for example, they experience an increase in a business mortgage or loan or in the value of a partner’s or shareholding director’s interest in the business.
If an owner sells their business, ownership of the cover can even be switched from the business to themselves – although there may be some tax consequences from doing so.
Using whole of life for inheritance tax planning is still relevant but there are many more areas of financial planning and customer needs that can be supported by a whole of life product.
For holistic financial protection planning the term market is well established providing mortgage, family and business protection. The whole of life market on the other hand, has in the past been seen as a niche area.
But the changes within the whole of life market now provide advisers with valuable new sales opportunities and has rendered many perceptions about the product out of date.
There are still many situations in which term assurance will prove preferable and, indeed, in which unit-linked whole of life may appeal but anyone aiming to provide a truly holistic financial planning service during the RDR era should at least consider all viable options.
Flexibility
Years ago people could generally predict when childcare would end, when their mortgage would be paid off and when their retirement would start. Now people are buying property later in life, they have second families to support, start businesses when they are older, retire later and live longer.
A whole of life plan with its flexibility and upper age limit could provide a practical solution to the financial implications that come with these lifestyle changes.
So maybe it is time to give whole of life another chance and consider it as a viable alternative to term assurance in certain situations. And with the government’s proposed changes to the way we pay for social care in our old age there has never been a better time to recommend the product to clients.
This year, on top of the usual challenges for the industry, we have increasing prices and an added degree of unpredictability as products outside of protection move from commission to fees. One thing will remain the same, however, the need for protection is as great as ever.
Jennifer Gilchrist is senior product development manager at Scottish Provident
