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Whole of life insurance

Whole of life insurance

Help protect what's most important to you. 

Kamran Altaf
From the Life team
4
minute read
posted 14 FEBRUARY 2020

What is whole of life insurance? 

Whole of life insurance is a type of policy that guarantees an insurance provider will pay out a lump sum to your loved ones when you die, rather than within a fixed time frame. This cover is often called whole of life assurance. The term ‘assurance’ means that the policy guarantees to pay out upon death, and ‘whole of life’ insurance is typically the main assurance product. 

How does whole of life cover work? 

When you take out a whole of life policy, you usually pay a premium on a monthly or annual basis. An insurance provider takes some of your payment to pay for the policy, and invests the rest. You’ll remain covered as long as you pay the premium. 

As this policy type usually involves an investment approach, it can be more complex. Therefore, if you’d like to learn more about this subject, read our guide explaining the differences between  whole of life cover and life insurance.

What types of whole of life policy are there? 

The two main types of whole of life cover are: 

  • Balanced cover  – This is sometimes called standard cover and it’s when your premium is set by a provider at a sum that’s high enough to remain the same level for the whole length of a policy. The pay-out will also be fixed and it will have been agreed when you sign up for the policy. 
  • Maximum cover  – This cover is often cheaper at first, because much of your payment goes on your policy instead of being invested on your behalf. However, a provider will review your policy (after a pre-agreed timeframe) and can increase your premium if you are considered to be more of a risk. 

It’s worth noting that there are also whole of life plans that charge a fixed premium for a set amount of cover. You’ll know up front how much a policy costs, how long it will run for, as well as the sum you’ll get as a pay-out. 

How much can whole of life insurance cost? 

Whole life insurance rates can be affected by many things. The cover amount is likely to be the number one factor, as you decide how much of a payout you’d like your beneficiaries to receive. Other things that insurance providers may consider include your age, any existing health conditions, medical history (and that of your family) and your lifestyle  habits.

How much could a policy pay out? 

Your lump sum payment, which is tax-free, will depend on the specific details of your policy. Each policy is different and so will be the size of your pay-out. Sometimes, you can choose to stop paying once you’ve reached a certain age. In other cases, you’ll keep making monthly or yearly payments until you pass away. Whole of life cover can also be set up in a trust – in this instance a pay-out would be made to the trustees, who’ll be in charge of distributing a sum to any beneficiaries. 

Is a whole of life insurance policy right for me? 

Once you’ve thought about a plan, it’s time to decide if a whole of life insurance policy is for you. Whichever policy you go for it’s crucial that you’re aware of any exclusions and limitations, so that you fully understand what you’re signing up for and your loved ones won’t be left with less than you expect. 

We don’t offer whole of life insurance as a standalone policy, so you may need to speak to a specialist or shop around to get this type of policy. However,  over 50s  life insurance can sometimes have whole of life insurance included in it. 

Should I get term or whole of life insurance? 

It depends on your situation. The attraction of whole of life insurance is that you’re guaranteed a payout, so you’re safe in the knowledge that, whenever it happens, your loved ones will receive a fixed sum when you die. However, because of this, you typically pay a higher premium. You should also consider that, if you live to an elderly age, you may find yourself in a financial situation that no longer requires as large a payout. 
 

If you’re looking more for security, rather than simply payout, term life insurance can provide that cover. It’s designed so that, if you die earlier than expected, there’s a payout that can be used to cover financial burdens such as a mortgage or other debts. Because this type of insurance covers a fixed period, your monthly premiums are usually lower. You may be able to lower them further by choosing a decreasing term insurance policy, rather than a level term. 

Can I get a joint whole of life insurance policy? 

A joint life insurance policy is one that covers two people, but pays out for just one death. It’s designed to secure the financial future of the remaining one of the couple. This usually comes in the form of a lump sum payment, which can be used to pay off a mortgage, or cover other debts and financial commitments. 

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