Whole of life insurance, or life assurance, policies are designed to pay out in the event of your death, whenever this may be.
This is as opposed to term life insurance, which will only pay out should you die within a certain set period of time.
There are various benefits to whole of life cover that we’ll go through over the course of this guide.
In This Guide:
- Whole of life assurance vs. term life insurance
- Is whole of life cover more expensive?
- Should I get whole of life assurance?
- Whole of life insurance surrender value
Whole of life assurance vs. term life insurance
When you take out a fixed term life insurance policy, then up until the end of the set period (generally around 25 years), it will pay out a tax-free sum on your death. However, should you live beyond the set period, the policy will not pay out, nor will you get any return on the premiums you have already paid.
With whole of life cover on the other hand, you will be covered for you entire life and whenever you do pass away, your policy will pay out.
If you want to be safe in the knowledge that your loved ones will receive the cash they need to maintain financial stability and comfort in the most difficult of times, then a whole of life policy is likely to be for you.
However some people prefer term insurance as it means that you don’t need to keep paying for your life insurance when you're much older and your family might be less financially dependent on you.
Is whole of life cover more expensive?
Term insurance tends to be cheaper than whole of life cover, but it is important to strike a balance between short-term costs and long-term rewards.
It is sometimes worth paying a little bit more so that you can be certain that your loved ones will receive the pay-out they need should the worst happen.
Fixed v reviewable premiums
You should check with your provider to see whether their policy comes with guaranteed or reviewable premiums. Guaranteed premiums will stay the same throughout the course of the policy (unless you change the level of cover), whereas reviewable premiums will be subject to change based on various different factors including general changes in the insurance market.
Should I get whole of life assurance?
If you're under 50 and want to guarantee a good inheritance or to make sure that your family can keep up with daily expenses as well as any household debts, then a whole of life policy might just you the peace of mind you need.
If you're older, you might benefit from a dedicated over-50s life insurance policy, which will offer coverage for the whole of your life, but with certain other stipulations and benefits.
Whole of life insurance surrender value
When you take out a whole of life policy, you’ll generally have the option of cashing it in at any point and in return you’ll receive what is known as the surrender value.
This won’t be as much as the full policy value, especially if you do this early on, but it’s good to know that the option is available.
Always check with your provider and read the policy small print to find out whether you have this option and what kind of surrender value you can expect if so.