Is Whole of Life Insurance Worth It?

What is whole of life insurance?

Whole of life insurance (also called whole life insurance) covers you for your entire life — there is no fixed term that expires. As long as you keep paying premiums, the policy will pay out whenever you die. Unlike term life insurance, which only pays out if you die within the term, a whole of life policy is guaranteed to pay.

Whole of life vs term life insurance

• Term life: Fixed term (e.g. 25 years). Cheap. Only pays if you die within the term. Most people outlive it — that's the point.
• Whole of life: No fixed end date. Expensive. Guaranteed to pay out — whenever you die. Premiums are much higher.

When is whole of life insurance worth it?

Whole of life makes the most sense in specific situations:

• Inheritance tax planning: If your estate will exceed the inheritance tax threshold (£325,000+), a whole of life policy written in trust can provide funds to pay the IHT bill without forcing the sale of estate assets
• Guaranteed legacy: If you want to leave a guaranteed sum to beneficiaries regardless of when you die
• Funeral costs: A modest whole of life policy covering funeral expenses is reasonable (though over-50s plans are often cheaper for this purpose)

When is it NOT worth it?

• As a substitute for term life insurance during your working life — the premium is far higher for the same sum assured
• If your estate is well below the IHT threshold
• If budget is a concern — the same premium buys significantly more coverage on a term policy

How much does whole of life insurance cost?

A healthy 40-year-old non-smoker can typically get £100,000 of whole of life cover for £80–£150/month — compared to £15–£25/month for a 25-year level term policy at the same sum assured. The higher premium reflects the guaranteed payout.