Whole life policies
Unlike term insurance, a whole life insurance policy gives you cover for as long as you keep paying the premiums - usually, the premiums stay the same, but the death benefit may increase because a proportion of your premiums is invested and, as that investment builds value, so the benefits increase. That added value is also tax free until you realize it or borrow against it. The greatest tax efficiency is achieved if you have enough free capital to pay a single lump sum premium. It operates as a form of tax shelter.
Companies usually offer you a choice about the form of investment and the rate of return. Some offer a guaranteed minimum, others a variable rate which has greater risk but may inflation-proof the policy without you having to pay a higher premium.
This kind of policy has the advantage that once it is in place, you do not have to take a medical examination later in your life. But the actual investment returns are low when compared to other formal investment vehicles even when you take account of the potential tax savings. So do not treat this as an investment. It is life cover that holds its value and protects the ones you love.
