Whole-of-life insurance explained

What is whole-of-life insurance?

Whole-of-life insurance is a type of life insurance policy that ensures a lump sum payout to your loved ones from your insurer when you die, no matter when that is.

This is in contrast to term life insurance, which only pays out if you die within the specified term of the policy.

• Find out more: what does life insurance cover?

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of a provider before committing to any financial products 

How much does whole-of-life insurance cost?

Whole-of-life insurance is generally a more expensive form of life cover than term life insurance or family income benefit insurance.

That's because insurers know that everyone will die eventually, so as long as you continue to pay the premium, they will have to pay out.

To help you understand the potential costs involved in whole-of-life insurance, we've compiled illustrative quotes based on different age groups and coverage amounts. Each quote is tailored to a non-smoker working in an administrative role. The higher the coverage amount and the older you are, the more you can expect to pay monthly.

The quotes provided are estimates intended to give you a rough idea of the potential costs for whole-of-life insurance. Actual premiums may vary based on various factors, including your health, lifestyle, and the specific terms of the insurance policy. 

For a 30-year-old

For a 40-year-old

For a 50-year-old

• Find out more: which is better, joint or single life insurance?

What affects premiums and how long you pay

When you apply for a policy, you will be asked to answer a list of lifestyle and medical questions that will directly impact your premiums. The final cost will be come down to a host of factors about you, such as:

• Level of cover
• Age
• Health - for example, if you have any pre-existing conditions
• Lifestyle - for example, if you smoke or vape
• Occupation - for example, if you work in more dangerous professions such as aviation or emergency services

Despite the name of the cover, whole-of-life policies only require you to pay premiums up to a certain age, typically to age 90. This varies between insurers and policies, however, so read the terms and conditions of any policy closely before taking it out.

• Find out more: best income protection providers

What are the different types of whole-of-life insurance policy?

Whole-of-life policies broadly come in two main types: balanced cover and maximum cover.

Balanced cover

With balanced (or standard) whole-of-life insurance, your premiums will stay the same throughout your policy. Even when you get older, and your health may deteriorate, you will still pay the same amount for your cover. As a result, your premiums are guaranteed.

You will also agree a fixed cash sum that the insurer will pay out when you die.

• Find out more: can I get life insurance with pre-existing conditions?

Maximum cover

With a maximum cover policy, your cover is linked to a financial services investment fund. The insurer invests the money you pay each month, in the hope that the returns generated from that investment will be sufficient to cover the cost of the eventual payout.

Your premiums will then be reviewed on a periodic basis. If the investments are not performing to the level that the insurer wanted, your cover may be changed. The insurer may increase your monthly payments, or reduce the size of the payout your loved ones will receive after you die.

While these policies are likely to be cheaper initially, premium increases are likely – and in some cases, they can be substantial.

• Find out more: Critical illness insurance explained  

Pros and cons of whole-of-life insurance

Here are the key advantages and disadvantages of taking out a whole-of-life policy:

Pros

• It can help your family deal with an inheritance tax bill, which needs to be paid before beneficiaries can apply for a grant of probate. This is reliant on the policy being written in trust, though. Find out more in our guide to how to write life insurance in trust.
• Whole-of-life cover may also appeal if you want to leave funds to your loved ones so they can pay for expenses such as your funeral costs.

Cons

• The payout may be unnecessary if your loved ones are no longer financially dependent on you. For example, by the time you die you may have cleared your mortgage and your children have long since left home. In which case, a term life insurance policy may be better suited.

Find out more: what is mortgage life protection insurance?

Whole-of-life insurance FAQs

Can I cash in my policy early?

Some whole-of-life insurance policies will allow you to cash them in, and get some level of payout before you actually die.

If you are tempted to do this, be sure to check the terms of your policy. The cash value of a life insurance policy may work out as significantly less than what you have paid in premiums over the years.

There may also be charges associated with cashing in your life insurance policy.

• Find out more: is it worth getting over 50s life insurance?

What happens if you stop paying? 

If you simply cease paying your monthly premiums, then your whole-of-life cover will stop and you will not get back any of the premiums paid. This is the same with term life insurance.

Is term insurance better?

Term insurance offers a number of different policies and can be used for different purposes. 

You might have one policy to pay off a mortgage if you die, another to provide a family income and a third to leave a lump sum. Term insurance is often cheaper and you can stop paying it once you no longer need life insurance.

Whole-of-life insurance is more expensive but will last longer.

Which you need or would best suit you depends on your personal circumstances and the prices you are quoted.

• Find out more: what are the benefits of multiple life insurance policies?