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What Is Whole Of Life Insurance?

Whole of Life Insurance is a policy where you’re guaranteed a pay-out from the insurer whenever you die, because the policy has no expiration date. As long as you pay your monthly premiums, you can relax knowing that there is enough money aside to cover whatever you may leave undone. 

Better still, whole of life insurance is a policy that lasts for the policyholder’s lifetime. If the policyholder dies, whole of life cover pays a lump sum to their family or beneficiaries. A similar type of cover is term life insurance. The difference between the two policies is that term life covers you for a fixed period of time. Whole of life guarantees a payout after you die. 

Your beneficiaries won't receive a payout if you die before your term life policy runs out. With whole of life insurance, a payout is always guaranteed whenever you die. That is so long as you have cover for the condition. This guarantee is why whole of life insurance is also called life assurance. If you would like whole of life insurance, you’ll need to pay a premium, the amount will vary from insurer to insurer. In exchange for this premium, you will receive a payout in the event of your death.

Depending on the policies of your insurer, you can pay these premiums monthly or yearly. You can make payments until you die, for an agreed time or as a one-off payment. The options available depend on your provider. The price of your premiums depends on several factors. These include age, gender and health for example.

Many whole of life insurance policies also let you invest part of the money from your premium. That means it could become a form of equity if the cash value grows. If you wish, you can withdraw some of this cash tax-free. This won’t affect the payout sum as the investment element of most policies is an added benefit to the policy.

You may also get to decide how much money you invest. As well as where it gets invested, and how much is put into your life assurance. Most of the time, the insurer will make these decisions.

Can You Have More Than One Life Insurance Policy?

Yes, you can have as many policies as you want. It’s completely up to the individual. For instance, you could have whole of life and joint life insurance. There are pros and cons to having a combination of policies.

One of the main pros is that if you have two policies, you could have two payouts. Another pro is that you’ll most likely be covered for more eventualities. Despite this, paying two premiums can be quite expensive and is not always possible. 

The good thing is most insurers understand that everyone’s situation is different. It is usually possible to adapt a policy to match your requirements. Then, if your circumstances change, you can review your policy and amend it. 

Why Should I Choose Whole Of Life Insurance?

Because Whole of Life Insurance has no expiration date, you’re guaranteed a pay-out. This might be suitable if you want to make sure you’re covered no matter what.

Whole of Life cover can be expensive when compared to Level Term or Decreasing Term Life Insurance because a claim is inevitable.

Whole of Life policies can be taken out by anyone at any age, however if you’re older with no mortgage and no dependents you could use whole of life to leave an inheritance or to cover the costs of your funeral.

What Are The Benefits Of Whole of Life Cover?

The guaranteed pay-out you’ll receive is a definite benefit for a Whole of Life policy, as well as the peace of mind you’ll receive knowing that your family will receive a lump sum when you die.

Are There Any Considerations With A Whole Of Life policy?

It’s important that you spend the time fully understanding the terms and conditions laid out in a Whole of Life policy so there are no nasty surprises or shocks down the line. Whole of Life Insurance can have different terms and conditions based on the insurer offering the policy.

Because of the inevitable claim on the policy, Whole of Life cover is also more expensive than other Life Insurance options. Make sure you can afford the premiums – you could be paying late into your life, so budgeting this properly is recommended. Most insurers offer policies where you will pay up until 85-90 years of age, and after then you are no longer required to pay as you’re then covered.

Typically, protection plans have no cash-in value and cover will cease if premiums are not maintained, however some Whole of Life plans have a ‘surrender value’ where a small amount of the cover paid may be returned to you should you not wish to carry on with the plan – you will need to check with the insurer to see if this is an option they provide.

How Much Whole Of Life Insurance Do I Need?

The amount of life insurance you need is unique to your personal circumstances. For instance, if you are single, without any children and no debt, you may not need a large payout. You'll need to consider how much you might need to pay off if you have a partner, children, a mortgage and other debts. You can then work out how much life assurance you would need based on these figures. You can calculate this by adding up all your debts and your family’s outgoings.

You should also check if you have any other types of automatic life cover in place. For example, your employer might offer a death-in-service payout. This is usually 3-4 times your salary. This amount might be enough life cover if you are single and have no debts.

Are Whole Of Life Insurance Policies Taxable?

A whole of life policy is not subject to capital gains tax or income tax. But, if your estate is worth over £325,000, you may have to pay inheritance tax.

This is charged at 40% for any assets over that threshold. It is possible to avoid inheritance tax by writing your whole of life policy into a trust. This can make a big difference to the payout that your beneficiaries will receive.

The £325,000 threshold could change in future. So, it’s best to check the Inheritance Tax (IHT) Threshold to see if these tax rules still apply. 

Does Whole Of Life Insurance expire?

No, it doesn’t. Whole of life insurance policies last until you die, they are permanent and don’t have an expiry date. This means you don’t have to worry about buying a new policy or extending your existing one if it’s nearing the end date.