Whole of Life Insurance

What is whole of life insurance?

Whole of life insurance, or whole of life assurance is a type of life insurance that pays out a lump sum to your loved ones when you die. There’s no fixed time frame for this policy to be paid out. A lump sum is guaranteed as long as your policy is in place in the event of your death. Whole of life insurance is typically more expensive than other life insurance policies because the policy lasts for your entire life.

How does whole of life insurance work?

Whole of life insurance works differently to other life insurance policies. You pay a premium on a monthly or annual basis. Your insurance provider then takes part of the payment to pay for the policy and invests the rest. When you die, your insurance provider will pay out a lump sum to your loved ones but the amount will vary depending on the specific details of your policy.

It’s also possible to set whole of life insurance up in a trust. In which case, a payout will be made to the trustees and they’ll be in charge of distributing a sum of the payout to your beneficiaries. Whole of life insurance is guaranteed to pay out, unless the cause of death isn’t covered by your policy or you missed a monthly payment.

What types of whole of life insurance can I get?

There are three main whole of life insurance policies available:

  • Non-profit whole of life insurance – you pay a fixed premium throughout your life. In the event of your death, your insurance provider pays out a set cash sum.
  • With-profit whole of life insurance – you pay a fixed monthly premium and your insurer invests the money on your behalf. When you die, the payout is based on how the investments perform, so your family could get a big or small payout.
  • Unit-linked whole of life insurance – your monthly premiums are based on the size of the payout you want. Your premiums are invested into the stock market by your insurer. So if the investments underperform, you’ll need to pay more in.

How much does whole of life insurance cost?

The cost of whole of life insurance depends on your age, medical history and the level of cover you take out. Your premiums might be cheaper if you take out a joint life insurance policy with a partner; they’re typically cheaper than having two individual policies.

If you have a poor medical history, you might find that your premiums are more expensive or you might find it difficult to get accepted for whole of life insurance altogether.

Whole of life insurance

What are the pros and cons of whole of life insurance?

Pros

  • Your loved ones are guaranteed a payout provided you keep up to date with your monthly payments
  • Your premiums are fixed
  • It builds cash value over time as you pay your premiums

Cons

  • The premiums are typically more expensive than term policies with a comparable death benefit
  • Some of your premium is invested so it’s much more complex than other life insurance policies

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