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Should I get Whole of Life Insurance?

Where term life insurance gives your loved ones a pay-out if you pass away within the term, whole of life insurance covers you for life. If you want a guaranteed pay-out for your family and not a policy specifically just to cover your mortgage or your children growing up, then this might be the best life insurance for you.

In this guide we will look at:

  • What is whole of life insurance?
  • How much it costs
  • FAQs

Whole of life insurance (also known as life assurance) will cover you for your entire life. You pay premiums every month, or every year, and when you die your family will receive a tax-free lump sum.

The premiums for whole of life insurance will be a little more expensive than those for term insurance. This is because your loved ones are guaranteed a pay-out, no matter when you die.

There are two main types of whole of life cover. This type of life insurance is designed to pay out to your family eventually after a long period of time, unlike term insurance which is aimed to cover for sudden or unexpected deaths when you are younger. Because of this, most plans are linked to an investment fund. The two main types are:

  • Balanced cover: This type of whole of life insurance is designed to have the same level of premiums throughout the cover. The pay-out amount will also be agreed when you buy the policy. Because of this assurance, this option is the more expensive of the two.
  • Maximum cover: This cover is cheaper at first, your premiums will go mostly into the policy rather than being invested. This means, however, that the premiums may increase as you get older, especially if your health or circumstances change.

There is another type of whole of life insurance that is not linked to investment plans. The premiums will be fixed from the day you purchase until you die. This gives you the certainty of exactly how much you will pay and exactly the amount your family will receive.

Even if your death is not something you are concerned about right now, taking the steps to protect your family financially in the future can give you peace of mind and save them a lot of stress and worry at what is sure to be a traumatic time in their lives. The earlier you get life insurance, the more affordable the premiums will be, so even if you are young and healthy, whole of life insurance is worth looking into sooner rather than later.

Whole of life insurance can help cover your funeral costs, the day-to-day living of your descendants, and the costs linked to your death, such as the inheritance tax.

Due to the way whole of life insurance works, the premiums tend to be more expensive than term insurance. Your family is certain, at some point, to get a pay-out whereas with term insurance it depends on when you pass away.

This is why it is important to make sure you can pay the premiums well into your old age. If you stop paying your premiums the cover will end, even if you might be able to cash in the policy. Once you are older it is harder and more expensive to get life insurance again.

The cost of life insurance will also not be the same for every person. The ideal pay-out for your loved ones will not be the same as for someone else’s. This means your premiums will not be the same as someone else’s. Also important to consider are the health and lifestyle factors that will affect how much you pay, such as; your occupation, your lifestyle and your medical history.

There are several ways to bring the cost of your life insurance down. The first way is to start looking into buying life insurance while you are young. Life insurance gets more expensive the older you get. So even if you think your family doesn’t need to worry about your death for a while yet, it’s best to start considering your options early on.

Another way to bring the cost down is to make healthier lifestyle choices at least 12 months before you buy life insurance. Everything from your diet, how often you exercise or if you are a smoker or not can drive the cost of your premiums up.

Here are some of the most common questions that we get asked about LIFE INSURANCE.

Can I take out joint life insurance with my partner?

Joint life insurance is sometimes taken out by couples as a seemingly more affordable way to cover both of you for life.

Most joint life insurance pays out only once so when one half of the partnership dies, the other person will get a lump sum and then will not be covered themselves. Also, as they will now be older, it will be more difficult to get life insurance again. This is why joint life insurance is only a seemingly more affordable option for couples.

What happens if I stop paying my premiums?

It is important to make sure you can pay your premiums well into your old age as if you stop, your cover will come to an end. Even if you die, your family will not receive anything. It is possible to cash in your policy if you find you cannot afford to pay premiums anymore but the money you get back will not be the same in value as the money you paid in.

What if I become terminally ill?

In life insurance terms, terminal illness refers to an illness where you are diagnosed to pass away within 12 months. You do not need to buy extra cover for this as in most cases it will be included in your life insurance policy. The money will be paid out to you when you are diagnosed to spend as you wish.

What if I become critically ill?

Unlike with terminal illness, critical illness cover is an optional extra you can add to your life insurance. Where whole of life insurance pays out a lump sum when you die, critical illness cover will pay out if you are diagnosed with a serious illness or disability.

This can be crucial to your financial wellbeing if you are dependent on your salary to live on and is an extra well worth getting.

If you still need life insurance advice to protect your family then you can get FREE and FRIENDLY help from our EXPERTS on 0800 009 6559 or CLICK HERE

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Is it worth paying for life insurance?

Yes, if you’ve got children or financial dependents then you should have life insurance to protect them if you die. Martin Lewis and the Financial Conduct Authority recommend that you take out life insurance to protect your family and your home. Generally, life insurance premiums start from as little as £5 per month and will be cheaper for younger adults.

Common myths about life insurance:

  • Life insurance won’t pay out (pays out 98% of claims)
  • People with medical conditions can’t have life insurance
  • Life insurance is expensive
  • Savings can be just as effective as life insurance
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Is life insurance worth it? - iam|INSURED

What is the average cost of life insurance per month?

Based on recent research carried out, the average cost of life insurance is approximately £38 per month and the average level of cover is £152,000. Life insurance premiums also vary dramatically from one insurance provider to another and you can reduce your monthly premiums by shopping around.

Fundamentally, life insurance premiums vary depending on your age, health and the amount of cover that you need, starting from as little as £5 per month. You can also get life insurance to protect your family and your home against financial loss if you die.

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Average cost of life insurance - iam|INSURED

What does life insurance cover you for?

Life insurance is a monthly renewable ‘term insurance’ contract that pays out a cash lump sum or regular payments on death to your family or beneficiaries. Policies are most commonly used for family protection or mortgage protection for your loved ones if you die and your household income reduces, plus the additional issues of losing a parent or carer.

Traditional life insurance will not exclude any pre-existing medical conditions and will cover suicide after 12 or 24 months. You can also use life insurance for business protection purposes as well as tax-efficient business life insurance for directors or key people.

What are the disadvantages of life insurance?

The biggest and most common problem that consumers have with life insurance is the cost and the monthly premiums. This is the top reason for policy cancellations and why more people don’t take out life insurance to protect their family.

Another key disadvantage with life insurance is that it holds no investment value, nor can you cash it in. Life insurance works like any other traditional general insurance policy (e.g. car insurance, house insurance, pet insurance etc.), you pay a monthly premium and it will pay out in the event of a claim. Some people decide to use savings instead of taking out life insurance but you need to make sure that you have sufficient savings to cover the costs of death for your family.

Why do I need life insurance?

The fact is that nobody actually ‘needs’ life insurance, but it is strongly recommended that families and couples have cover to protect their loved ones in the event of death. Martin Lewis recommends life insurance and says “this is something that every parent, partner, or person with any other type of dependent needs to consider”.

Life insurance financially protects your loved ones if you die and pays out a cash lump sum to repay your mortgage, pay for school fees, replace lost income, and pay for regular outgoings. Mortgage life insurance is not linked to your mortgage debt so you can use it to pay off some or all of your mortgage.

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