What is whole of life insurance?
Whole of life insurance (also called whole life cover) is a policy that covers you for your entire lifetime — not just a fixed term. Unlike term life insurance, which only pays out if you die during the policy term, whole of life insurance is guaranteed to pay out whenever you die.
How does it work?
You pay premiums throughout your life (or until a specified age, such as 90). When you die, the policy pays a lump sum to your beneficiaries. Because a payout is inevitable, premiums are significantly higher than term insurance for the same sum assured.
Who is whole of life insurance for?
- Inheritance tax planning — a whole of life policy written in trust can cover an anticipated IHT bill, leaving more of your estate intact
- Leaving a guaranteed legacy — if leaving a specific amount to family is important regardless of when you die
- Funeral planning — particularly over-50s plans, which guarantee a payout for final expenses
- High net worth individuals — using life insurance as part of an estate planning strategy
What does whole of life insurance cost?
Significantly more than term insurance. A 40-year-old might pay £30–£60/month for £200,000 of whole life cover, versus £18–£28/month for a 25-year term policy. Premiums can also be reviewable (subject to increase) rather than fixed.
Types of whole of life cover
- Guaranteed acceptance (over-50s plans) — no medical questions, lower cover amounts (up to ~£20,000)
- Standard whole of life — underwritten, higher cover amounts available
- Unit-linked whole of life — premiums invested in funds; surrender value builds over time
Frequently Asked Questions
For most people under 60 with a mortgage and dependants, term life insurance is better value. Whole of life is more valuable for estate planning, IHT mitigation, or those who specifically want a guaranteed payout.
Some whole of life policies have a surrender value — a cash amount if you cancel. Unit-linked policies typically have a larger surrender value. Guaranteed acceptance (over-50s) plans usually have no surrender value.