Whole of Life Insurance

Whole of life insurance

Whole of life insurance policies pay a tax-free lump sum to your family when you die. Whereas term-based life insurance policies cover you for a fixed period, whole of life insurance policies cover you until your death. Payout is guaranteed with this type of cover, so whole of life insurance is sometimes referred to as life assurance.

What is whole of life insurance?

A whole of life insurance policy is the most comprehensive type of life cover available. It can be used to provide financial security for your loved ones and is guaranteed to pay out as long as you keep up with the payment of your monthly premiums.

Common reasons for taking out whole of life insurance include:

• Providing financial security for family members in the event of your unexpected death
• Paying off outstanding mortgage repayments to secure your family home
• Assisting with the cost of raising children and paying for school or university fees
• Helping to pay for funeral costs, relieving your family of the burden during their time of grief

How does whole of life insurance differ from set term life insurance?

As claims are inevitable for whole of life insurance, these policies are more expensive than fixed term life insurance. Most whole of life insurance policies have fixed premiums and assured sums for the first 10 years of cover, after which the amounts are reviewed.

Other policies offer fixed premiums with a fixed amount of cover. This means that you will know how much the policy will cost and how much the assured sum will be from the outset, without any risk of these amounts changing.

Do I need whole of life insurance?

If you wish to provide financial security for your family when you pass away, a whole of life insurance policy is guaranteed to pay them a lump sum when you die.

This can make it an attractive choice for anyone wishing to give their family peace of mind that, should the worst happen, they won’t be left with financial worries. According to the Association of British Insurers^[1], the average payout for whole of life insurance in 2015 was £5,900, with almost 99.99% of claims paid.

As well as safeguarding your family’s financial future and paying your funeral costs, whole of life insurance can be used to avoid overpaying on inheritance tax. Inheritance tax is currently set at 40% of the value of your estate over the £325,000 threshold. By choosing a whole of life insurance policy that is written ‘in trust’, you can ensure that the payout is not liable for inheritance tax, leaving a greater amount for your family when you die.

How much does whole of life insurance cost?

A variety of factors will affect the cost of your whole of life insurance policy, including:

• Your current age
• Your health and medical history
• Whether or not you smoke
• The flexibility of your chosen policy
• The number of people on your policy
• The amount you wish to pay out when you die

Despite being the most comprehensive form of life insurance, whole of life insurance does not have to be unaffordable, with policies starting from as little as £5 per month.

How do I compare whole of life insurance policies?

ActiveQuote can help you to compare whole of life insurance policies. Our online comparison tool finds and compares quotes from leading life insurance providers including Aviva, VitalityLife and Zurich, helping you to find the best policy for your situation.

If you’d rather get advice and support from our impartial experts over the phone, call ActiveQuote for free on 0800 862 0949.

^[1]ABI 2016