How does whole of life cover differ from term cover?

Whole of life insurance has no end date. It pays when you die, at any age, provided the policy has not lapsed.¹ Term cover pays only if you die within a fixed term and has no cash-in value.²

How does a whole of life policy work?

Zurich’s Futura, sold in the UAE through banks including HSBC,³ is a unit-linked whole of life policy: your premiums buy units in funds you choose, and the cost of the life cover and other benefits is taken from those funds each month by cancelling units.¹ The cost of the benefits depends on your age, gender, smoking status and health, and Zurich says it rises each year.¹

Futura lets you pay a single premium, regular premiums until age 96, or regular premiums for 7 to 50 years. Zurich calls the shorter option a “vanishing premium”.¹

Zurich’s key features document says this can happen if you stop or reduce your payments or take withdrawals. If fund returns are lower than illustrated, you may have to pay more, restart payments or pay an extra single premium to keep your benefits.¹

Ask for an illustration that shows when the policy would lapse at the lower assumed growth rate.

What do the charges look like in the early years?

High, for regular premiums. In Futura’s published charges, for the first 24 months of the policy 50% of your regular premiums go to set-up charges and 50% are invested. From months 25 to 60 the charge is 7%, and from year 6 it is 2%. Single premiums carry an 8% charge. There is also a monthly policy charge of USD 7.50, plus the fund managers’ own charges.¹

Futura has no surrender charge: if you cash it in you get the policy value at that time.¹ Because half of two years’ premiums went on set-up charges, that value can be well below what you paid in. Other unit-linked plans do charge on surrender. Zurich’s single-premium Wealth Accumulation Plan, also whole of life, deducts 5.75% if you surrender in the first month after paying a premium, falling to zero over three years.⁴

Before you sign, find the red page of surrender values the seller must give you, and check the value at years 2, 5 and 10.⁵

What can you add to a whole of life policy?

Futura’s optional benefits include critical illness, accidental death, cancer cover, loss of sight or limb, permanent and total disability, waiver of premium and a family income benefit. Optional benefits are open from age 18 to 64 and most stop at 70.¹ On a death claim Zurich can pay an advance of USD 7,500 from the proceeds towards initial funeral or repatriation costs.¹

Each benefit adds to the monthly charges taken from your fund. Ask for the cost of each one separately in your illustration.

Which costs less for the same cover, term or whole of life?

For the same amount of cover over the same years, term cover has no fund to build and no investment charges, and pays nothing back. Whole of life builds a fund value, takes charges from it, and pays out whenever you die if kept in force.¹² Which premium is lower depends on your age, health and the amounts, so the only way to compare is to put two illustrations side by side.

Ask for a term quote and a whole of life illustration for the same cover amount, and compare the total paid in over 20 years.