The evolution of whole of life assurance products since their heyday in the mid-90s is presenting financial advisers with new opportunities to grow their protection book and add value to their businesses.
In past years unit linked (or flexible) whole of life was the most popular form of whole of life assurance. More recently there has been a move away from investment linked plans towards more traditional non-profit propositions. To address this, a number of providers have reinvented their whole of life plans as protection-only products.
The protection gap is well documented and advisers with full financial planning permissions, as well as those not registered to give investment advice, have the option to grow their protection book and add value to their businesses via these products.
These emerging opportunities are explored in greater detail in our case study on whole of life assurance.
Whole of life assurance products can be an effective way to address client needs beyond the requirement for immediate protection. Advisers may wish to consider whole of life not just for inheritance tax planning but for lifestyle protection and wealth creation.
Unlike term assurance, which pays out on the death of the life assured during the term of the policy, whole of life assurance pays out on death whenever it occurs. This makes it a more effective solution for lifestyle protection in many circumstances.
Where the requirement is for lifestyle protection alone, whole of life assurance provides a more flexible approach than term assurance. In reality the need for lifestyle protection does not necessarily cease at retirement and, with the demise of the concept of a ‘normal’ retirement age, a more flexible solution is often required.
Many clients want to leave a legacy to their loved ones. Insurance is a tax effective way of creating wealth on death. The use of underwritten whole of life assurance plans opens up the possibilities to creating significant legacies, which can be written in trust for the benefit of specific beneficiaries.
Business protection represents tremendous opportunity for advisers to write more business while addressing the needs of their corporate clients. It comprises two elements: continuity planning and succession planning.
Traditionally, advisers have used term assurance plans to cover their clients’ key people as the policy must be either annual or short-term in order to benefit from tax relief.
However, the financial loss to the company on the death of a key person can be significant. While choosing a tax efficient solution is important, it is more important to have the right level of cover in place; whole of life should at least be considered - particularly in the case of business owners and controlling directors who are happy to continue to work beyond what most would regard as normal retirement age.
When a shareholder or partner in a business dies, their share of the business normally forms part of their estate and ultimately passes to their beneficiaries. In the case of a controlling partner or shareholder, this could mean the future direction and running of the business is dictated by people not closely associated with it and with no relevant expertise. A legal agreement is put in place giving the remaining partners or shareholders the right to purchase the shares, and the whole of life plan provides the funds to execute the agreement.
To further explore the ways in which whole of life assurance can be used and the benefits it can bring to clients and advisory businesses, our case study examines the distinguishing features of Scottish Provident's Pegasus plan. This document can serve as a benchmark for product research and comparison.Download