The Core Difference
| Feature | Term Insurance | Whole of Life |
|---|---|---|
| Duration | Fixed period (e.g. 25 years) | Entire lifetime |
| Payout | Only if you die within the term | Guaranteed on death |
| Cost | Much cheaper | Significantly more expensive |
| Cash value | None (most types) | Some policies build cash value |
| Best for | Mortgages, children, income replacement | IHT planning, estate planning |
When Term Insurance Is Right
- You have a mortgage to repay
- You have dependent children
- You want to replace income for a set period
- You want affordable premiums
Example: 35-year-old, £200,000 term policy, 25 years = ~£12/month.
When Whole of Life Is Right
- Inheritance tax (IHT) planning – guaranteed payout to cover the IHT bill
- Leaving a guaranteed inheritance
- Covering funeral costs (over-50s plans)
- Estate equalisation between heirs
Most people need term insurance. Whole of life is a specialist product primarily used for estate planning. For income replacement and mortgage protection, term is almost always the better value choice.
What About Over-50s Plans?
Over-50s guaranteed acceptance plans are a type of whole of life insurance with no medical questions. They are often used to cover funeral costs. However, premiums can exceed the eventual payout if you live long enough – read the small print carefully.
Frequently Asked Questions
Usually no. Term is cheaper and covers the critical period. Whole of life is for IHT/estate planning.
Yes. Written in trust, it provides a guaranteed lump sum to pay IHT without reducing the estate.