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Term vs. Whole Life Insurance: Which Policy Is Right for You?

Last updated: 02/02/2023 | Estimated Reading Time: 7 minutes

Life insurance policies offer you a way to look after your family even after you’re gone. By paying out a lump sum of cash to your family after your death, a life insurance policy can help them pay off any remaining debt (e.g. a mortgage), cover living expenses, reduce inheritance tax or simply improve their financial situation.

However, since there are many types of life insurance policies to choose from, it can be difficult to figure out the right cover for your needs. In this helpful guide, you’ll learn all about the main types of life insurance, with a particular focus on whole of life insurance and term life insurance, which will help you decide on the right policy for you.

In This Guide:

What Is Whole Life Insurance?

‘Whole of life’ insurance, also known as whole life insurance or life assurance, is a type of life insurance plan that covers you for the rest of your life. This means that your family is guaranteed to receive a payout no matter when you die, as long as you continue to pay your monthly premiums.

Since you’re basically guaranteed a payout with this type of policy, the amount you receive will generally be lower compared to what you would get with a fixed-term policy. Usually, you’ll pay fixed monthly premiums to guarantee a fixed lump sum, so your payments won’t increase or decrease.

What Is Term Life Insurance?

Unlike a whole of life insurance policy, term life insurance only covers you for a specific time period. This term commonly lasts around 20 years but will be decided between you and your insurer. Therefore, your family will only receive a life insurance payout if you die within this period. This is a great option for those who only need to ensure financial protection for their family up until a certain point, such as when their children leave home and find their own jobs.

Both whole life insurance and term life insurance don’t offer guaranteed acceptance. You may need to answer medical questions to secure one of these life insurance policies, and your answers will also affect how much your insurance costs. If you want to renew your term life insurance after the term ends, you’ll need to provide your medical information again. 

Pros and Cons

These different levels of life cover are suited to different personal and financial circumstances. To help you decide which one could be right for you, here are some of the pros and cons.

Whole of Life Insurance


  • Guaranteed lump sum payment as you’re covered for your entire life.

  • You know the exact payout your family will be getting. This will give your family financial protection and help you plan for the future.

  • No need to renew your policy as there isn’t a fixed term.


  • More expensive than term life insurance because you’re getting a guaranteed payout.

  • Your payout may be lower than what you would receive with term life insurance.

Term Life Insurance


  • Less expensive than whole life insurance.

  • More customisation options such as level term life insurance, increasing term life insurance and decreasing life insurance (find out more below).

  • Your beneficiaries could get a larger payout compared to whole of life insurance.


  • You have to renew your term life insurance cover once the term ends if you want to remain covered, and you’ll need to answer medical questions again.

  • No guaranteed payout as you aren’t covered for the rest of your life.

Further Options

Although term life insurance and whole of life insurance are the main policies you should be aware of, you can also customise your life cover even further to better suit your circumstances. Here are some other life insurance options you should consider:

Please Note: Not all insurance providers we work with offer all types of policies. Please do your research and compare quotes before proceeding.

Level Term Life Insurance

This is the most basic form of term life insurance. With level term life insurance, you’ll pay fixed monthly premiums and receive a fixed payout if you die within the set term, so your payments and the payout always stay the same. This is great for helping you avoid increasing payment costs, but bear in mind that inflation could erode the value of your payout over time.

Increasing Term Life Insurance

If you want to protect your cash sum from inflation, you could choose increasing term life insurance. As the name suggests, your payout will increase by a fixed rate each year, which will ensure some protection against inflation and rising living costs. However, your monthly payments will also increase over time, potentially making this policy more expensive than level term life insurance.

Since both your premiums and the payout will continue to increase, this insurance option is typically better for those who are primarily getting insurance to cover their beneficiaries’ living costs. However, not all insurance providers offer increasing term life insurance, so you’ll need to shop around. 

Decreasing Term Life Insurance

On the other hand, if you want your eventual payout to decrease in value over time, then you should consider decreasing life insurance. This option is particularly suited to those who want to use their insurance money to cover a mortgage, as the money you need for your mortgage will decrease over time until it’s paid off. Your premiums will stay the same, but decreasing term life insurance is generally cheaper than level term insurance since your payout decreases.

With decreasing life insurance, your payout will decrease over a fixed period (usually according to your mortgage payment schedule) until it reaches zero. However, this policy is only suitable for a repayment mortgage rather than an interest-only mortgage.

Joint Life Insurance

Joint life insurance is a great option for couples, especially if you have a mortgage or children. With this joint policy, you’ll pay premiums together (which is cheaper) and receive a payout if one of you passes away. Since this policy is designed to provide for the surviving person, it doesn’t pay out twice.

Over 50s Life Insurance

Life insurance can be more expensive or even unattainable if you’re older, you have certain health conditions or you have a dangerous lifestyle (e.g. a high-risk job, alcohol or drug abuse, smoking). In this case, a great option for you could be over 50s life insurance if you’re aged between 50 and 85. This insurance policy offers guaranteed acceptance, so you won’t need to answer any questions about your health and medical history (apart from age and smoker status).

Critical Illness Cover

Critical illness cover provides you with a lump sum payout if you can no longer work due to a serious illness or injury. This is particularly important for self-employed people who can’t take advantage of a typical workplace sick pay policy. 

Different insurance providers have different ideas of what counts as a serious illness, but generally medical conditions such as cancer, strokes and heart attacks will be included.

Often, insurance providers will allow you to add critical illness cover to your term life insurance policy to create a life and critical illness policy. However, you should bear in mind that this policy only pays out once, so if you make a claim after being diagnosed with a serious illness, you can’t claim again for an additional illness or death. Standalone critical illness cover isn’t offered by every provider, and it never pays out for deaths. 


Final Roundup: The Right Insurance Policy for You

Overall, the right insurance policy for you will be the one that suits your particular circumstances (e.g. age, marital status, debt, profession) without breaking the bank. This means you need to weigh up how much cover you need and the life insurance cost you’d incur.

At Money Expert, we’ll give you a helping hand by showing you a comprehensive range of life insurance quotes and policies from major insurance providers. With this knowledge, you can easily compare quotes and choose a policy that offers you the financial security you need. Get a life insurance quote on our website today to start your search.

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