Whole of Life Insurance

What is whole of life insurance?

Looking for a life policy that isn’t contained to terms or expires with time? Here’s a policy that lives on in time to guarantee that a final payment reaches your loved ones; it can be a tidy way of securing a legacy for what matters most.

Whole of life, sometimes called “life assurance”, is a lifelong policy that will pay-out eventually (if you meet your premiums). It can be ideal for those looking to leave something behind. It gets its name from it terms, which are infinite and result in a pay-out no matter what.

It has gained popularity as savvy option for lifelong cover, rivalling term-based insurances.

Think lifelong cover that gives back, guaranteed.

How does a whole of life cover plan work?

Every policy has its key pieces of information. These details makes a life policy personal.

  • What is a “term”?
    Usually a life policy will contain its period of activity between a start date and a conclusory one – these act as a kind of bookending for your policy. The term describes this period where you are actively covered. The term will come to define how long your cover lasts for – and when it starts. And for a whole of life plan, importantly, there is no end date (unless a policy is terminated by its holder, or premiums are missed.) Rather, the policy holds it value for the remainder of the policyholder’s life.
  • What is a “sum assured”?
    Where a term is used, traditionally, to define how long a policy is active, a sum assured, in policy lingo, defines the total sum a life plan holds. This is often known as the level of insurance you want; where each policy will contain an amount, or monetary value, specific to the goals of its holder. This value will be paid out as a lump sum on the maturity of a policy, where the holder has passed away.

Normally, a whole of life will hold a smaller amount when compared with term-based cover. Yet, that is because they are used for different purposes (and to meet different goals). A final payment is guaranteed, making this unique over a level term plan.

The monthly premiums, against every policy, will use your sum assured as a measuring stick to inform the cost. The value against a whole of life policy can cost more (than some term-based options) precisely because it ensures that a final payment will occur.

It’s most often popular with those in their later life stages, where financial burdens aren’t so demanding.

Why whole of life insurance?

Every policy type answers to a different goal.

Term-based life policies can establish satisfactory protections for larger loans (adding in, if your sum assured is sizable enough, room for other expenses.) These are categorised as life insurance products and a life policy, guided by this rule, will hold its value within a window of time.

Whereas, a whole of life plan will work differently. It can secure protections for a lifetime. Though, it being lifelong cover, it’s not normally opted into until the later stages of life in the same way an Over 50s plan is more attractive to an older demographic.

This design means a whole of life plan can last as long as you do.

Why people like decreasing term life insurance:

  • Guaranteed final payment.
  • A plan that ages with you – and so, it doesn’t expire.
  • Helps with tax bills.
  • Leave behind an inheritance.
  • Cover the costs of a funeral.

Not always is the goal of a life policy to secure debt. Rather, it can be to help promote wealth. Opting into a policy of this nature, for lifelong cover, can enrich the financial wellbeing of your loved ones – by leaving a legacy they find invaluable.

What is the maximum term you can have?

If you find the usual 25 years and upward terms too restrictive, then a whole of life could help free up your cash.

Having a life policy that doesn’t oblige deadlines has many uses.

When crafting a life policy, it’s useful to consider how a whole of life option can work favourably to help leave something valuable behind, such as inheritance. If you find that debts are already dealt with and your wealth could be spared a better use, perhaps whole of life could be the right match for you.

Deciding what’s right for me

Measuring up the effectiveness of a life policy to meet your needs is no easy feat – not always because the options, vast and many, can feel intimating, but rather that you don’t know how to decide.

It’s worth asking how each policy could work not only within your budget, but also to meet your goals. Both budget and goals are bookends to the quest for an ideal life policy. Yet, a life policy can be taken out for many reasons, not just settling up debts.

  • What are you looking to cover?
    This is a way of asking if a whole of life plan can faithfully carry out your plans. If, for example, you’ve tidied away your debts, as an older policyholder, and you’re looking for a way of leaving behind inheritance, then a whole of life could be more suited to your search. The fund secured from a guaranteed final payment could help your loved ones immensely. If you’re looking to settle large debts, which inevitably contained within your policy’s value, then a term-based offering, such as level cover, might more ideally help manage that financial chore.
  • Who are you looking to cover?
    You might, for example, wish to leave something behind for a loved one. If you’re later in life, leaving behind a parting gift can be a means of ensuring your legacy reaches it heights. Often people are motivated into a life policy based on an itch to look after their financial dependants, such as children. Leaving behind something for your loved ones is a strong motivation.
  • Does it suit my budget?
    A question of affordability is often a top priority for most: how much can I reasonably afford within my budget? Not necessarily the most affordable of life policy options, a whole of life policy does, instead, secure a final payment.

What is the average cost of whole of life insurance?

There’s isn’t one, ultimate, metric that measures up the cost of a life policy.

Rather, a life policy is calculated against several factors:

  • Your age.
  • Do you smoke?
  • Your health.
  • Your wellbeing.
  • The value of your sum assured.

Other than these guiding tiers for costs, where premiums are subject to dynamic calculations against your overall health and wealth, this list is not exhaustive. There are other reasons that insurers might choose to offer up more affordable premiums or, conversely, charge more. Sometimes risk, which is a powerful metric in your overall eligibility, can influence the cost of a premium, if not decisions about your policy. Risk describes your proximity to anything that might trigger a pay-out, such as risky hobbies, professions or other habits. Having a reduced risk in your lifestyle can help limit the costs of your premiums.

Yet, with whole of life, risk is fairly unknown, if imprecise to measure.

Regardless, a final payment is this policy’s guarantee, and so monthly premiums are generally costlier than other types of insurance.

Your premiums can be categorised under two regimes of pay: “fixed premiums” and “reviewable ones”.

  • Fixed monthly premiums
    A life policy with a fixed monthly pay schedule means that your costs will never change through the policy’s lifespan – no sudden hikes, scares or otherwise with how your money feeds into a policy.
  • Reviewable premiums
    If your premiums appear as “reviewable”, then the insurer can nominate to change you rates during an active policy. This is normally prompted by your risk factors, such as any change in your status to risk.

How does my age effect a whole of life policy?

In truth, your age makes your policy.

On the one hand, a whole of life policy is generally a better option for those in the later stages of life, precisely because of the guaranteed payment – and where the sum assured may be capped at a lower limit than traditional term-based counterparts.

Life assurance is a popular life product for those aged 50 and beyond. It can be a savvy way of structuring inheritance, or clearing away funeral expenses. It can be that parting gift, from you, that goes a long way in helping your loved ones.

On the other hand, however, your age can impact the affordability of the premiums made available to you. As a metric used to calculate your monthly premiums, age can help insurers determine your overall risk as a candidate opting into a life policy.

Later in life cumbersome debts the likes of mortgages are typically costs that have been tidied away, leaving your life policy’s final payment to be put toward something else, possibly more fruitful for your loved ones.

Age isn’t an obstacle for life policies. Rather, products like life assurance, such as whole of life plans, are targeted around those in the later chapters of their life stories.

This is a helping hand for you.

Some life policies, though not all, carry a useful clause whereby monthly payments cease at an upper age limit (typically between 85+). If your policy contains this, it’s important to know that your cover remains valid, even if you cease paying into it. This benefit is more common with Over 50s plans but is another perk for life assurance.

How much do I need?

As your life policy should be reactive to your budget, the amount you’re covered for will depend on you.

It helps to understand why you want a life policy.

  • Are you covering a sum for your loved ones?
  • Is your goal to cover the expenses of a funeral?
  • Or is your angle to leave behind inheritance?

Start by determining the goals of life policy, which can help to guide how much you’d like to leave behind. Often a policy is motivated by matters close to the heart, so thinking about your family’s needs can be powerful thought, too.

Ask yourself, how might your loved ones benefit from you cover?

What does whole of life actually cover?

Budgets, goals, risks – these can determine the size and shape of your cover.

What has it been used to cover?

  • An inheritance gift for the family.
  • Help manage the tax bill for any inheritance tax (depending on the size of the estate).
  • Funeral expenses.

There are other uses for a benefit against a whole of life policy – which is at the discretion of the beneficiary.

What types of whole of life policies are there?

Most inquires read something like this: “what is the best life insurance?”

The “best” policy, we believe, is one that answers uniquely to your goals and budgets.

How are whole of life & term-based insurance different?

The key differences, though not hard to spot, are in the term lengths.

A term-based cover offering describes any life policy that pays-out if death occurs within the insurable length of time, or term. This includes the likes of decreasing term & level term insurance. The term is fixed and contains the policy within a time-sensitive period of activity.

Yet, as mentioned, a whole of life plan guarantees final payment. There is no specified term that expires against these kinds of cover types – known as “life assurance”. Assurance offers up that guarantee. There’s a finality about this planning that traditional insurance lacks, because it will only pay-out on death within a policy’s term.

The remaining details look similar between both policy types. Premiums are calculated against an applicant’s health, budget and risk; the sum assured can be set at a higher final pay-out; and cover is secured through routine monthly payments, called premiums.

A whole of life policy can be more expensive, however, because the final payment is secured against death, rather than any specified term.

How are whole of life & an Over 50s plan different?

Most debate affordability, or cost-effectiveness.

Both will serve up a life policy for a lifetime, containing unique benefits. And you’ll secure a guaranteed final payment for either policy.

Yet, the medical information provided before entry on a whole of life is stricter and, therefore, more suitable for those later in life with good overall health.

Those with niggling health troubles might find that the costs of premiums are too pricy for the a common, if humbled, budget. An Over 50s policy has far more relaxed entry criteria, where it’s guaranteed that Over 50s can access this life plan (whole of life is more scrutinised on the applicant’s health).

The whole of life plan can offer up a larger sum assured, or total amount held in the policy. This means that people who opt for this category of life assurance tend to want a larger final payment.

Read our guide to learn more about Over 50s life plans 

What is better between a funeral plan and whole of life insurance?

A whole of life plan can be used to pay-off a funeral, but it can open up the benefit to more options. A funeral plan, however is fixed in sizing up the costs of your funeral.

Indeed, the average costs of funeral in the UK have steadily risen. Currently, the cost of a funeral option is about £3,757

This lays a strong foundation for accessing into a funeral plan, because it’ll clear away these kinds of essential provisions. It is, however, beneficial because a funeral plan can lock-in the current costs to make your funeral more affordable (it won’t always cover third party costs).

They can serve very different goals, depending on why you’re activating a life policy. If you’d like your benefit to serve, exclusively, to funeral costings, then a funeral plan might be the most suitable to satisfying your goals.

Yet, if you’re looking for more coverage, then a whole of life plan can open your beneficiaries to more opportunities with their received benefit of cash.

How much could a policy pay out?

The best part might just be the guarantee.

A whole of life plan is more like a neatly curated package: it wraps up, nicely, certain financial assurances, or certainties, with a lifelong term.

But how does the final payment work? And, importantly, what does it look like?

Guaranteed final payment

Central to this policy’s benefits is how the final payment works: on guarantee to the policy being taken out.

Unlike other types of life assurance, a whole of life policy can have tougher acceptance, where the medical conditions and history of the individual applicant are scrutinised.

Yet, once accepted, and as long as premiums are met, the final payment is guaranteed. This type of insurance has a high – if not the highest – pay out rate against percent of claims.

It’s also a lifelong form of cover, meaning that a policy won’t expire, or need renewing.

What does “lifelong” actually mean?

A life policy that’s lifelong means that your cover will last until death. No exceptions.

What does “waiver of premiums” mean?

This option, to waiver your premiums, means that should you fail to meet the monthly costs of your policy, because of illness or injury, then you’d still remain covered.

It could impact your premiums.

If it’s something you’d like to consider when building your policy, then it is requestable during application – though isn’t a routine piece of an everyday life policy.

Investment vs non-investment

A whole of life policy can be categorised twofold: “investment”, or with-profit, and “non-investment”, or non-profit.

The difference is in the certainty of the final payment.

  • Non-investment (or non-profit):
    You pay on a schedule of fixed-monthly instalments; your final payment is a secured sum, that you’ll discuss on application. These details remain fixed through the lifespans of the policy. The totality of your final payment may well be impacted by inflation.
  • Investment (or with-profit):
    Part of your monthly premium cost will be re-directed into investments. This will alter the outcome of your policy: either your beneficiaries will receive a higher payment, or a lower one, depending on the quality of the investment. There is a major risk involved with this riff on your insurance, where the totality of your final payment may be lost, or improved, on the performance of the investment.

What are its key benefits?

The benefits are manifold – and testify to the quality of this product.

  • Secure a larger sum assured.
  • Ensure greater flexibility with how your family uses the pay-out.
  • Your beneficiaries can reap the financial benefits of a guaranteed payment.
  • No expirations on your life policy.

How does inheritance tax work?

Presently, anything over the threshold of £325,000 is subjected to a 40% tax (including: property, possessions, life policy provisions, and savings.)

If you posses a large estate (an amalgam of these financial assets), then your tax could be larger.

Oftentimes people nominate a whole of life policy as a means of clearing through this tax.

Writing your whole of life insurance in trust

The proceeds of your policy will go towards your estate – and, therefore, be subjected to the inheritance tax.

Yet, by writing your life policy in trust you can thwart any financial losses here.

Essentially, you’d be removing your policy’s sum from your estate. This can limit how much of your provisions are lost to taxing.

You can also jump probate, so your family could access their inheritance quicker.

And, what’s more, your sum will be more faithfully guided by your wishes, with your loved ones accessing a greater slice of the pay-out.

How can I “layer” my protections?

Layering up your protection means having more from the policy that keeps your loved ones safe. There are a couple of useful hacks and guides on extending what you’re covered against – so, there’s more peace of mind to be won over yet.

Can I get joint cover on a whole of life policy?

In short, no.

Given the guaranteed final payment, the offering isn’t usually given out on a joint basis. This would increase the risk, which is already is rather high. Couples can, however, look to issue two separate policies.

Whole of life insurance with a critical illness option

Whilst it’s not currently possible to merge both, you could nominate to hold a critical illness plan as a seperate “layer”.

An optionable, though valuable, critical illness offering would secure you against any illness or injury, that is not terminal. The funds secured through this policy could replace absent incomes, enable recovery time, or go towards the everyday costs of your family’s lifestyle.

Whole of life insurance with a terminal illness option

Most policies will include this benefit by default.

It could secure your funding early and help with medical treatment or caring. This is normally contained within 12-month period from a diagnosis of a serious illness.

Where can I buy a policy?

It’s normally recommended to compare the market. Why?  Because you could secure a more competitive, cost-effective rate by searching out the UK market. And it’s done in a flash.

Compare for top deals (and save money)

Costs will always alter, sometimes significantly, between insurers.

Comparing life insurance quotes could seal the best deals out there – using Life Market can offer up a better chance at saving time and money on your application.

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