Whole of Life Insurance

  • Pays out a cash lump sum to help your loved ones manage financially when you die.
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What our Nerds say about whole of life insurance

Holly

INSURANCE NERD

Unlike term cover, there is no end date with a whole of life insurance policy. The insurer will pay out whenever you die, provided you’ve kept up with premiums.

This means your loved ones will have a cash lump sum, so they can worry less about money once you’re no longer around. This might be reassuring if you’re the main earner or have anyone who depends on your income.

If a guaranteed payout sounds like a good option, it’s worth being aware that you’ll usually pay higher premiums for that certainty. If you’re looking to cover something that has an end point, perhaps a repayment mortgage, you could consider term life insurance.

What is whole of life insurance?

It’s a type of life insurance that guarantees a cash payout when you die. Also called life assurance, unlike a term policy, you don’t have to work out how long you would need to be covered for – it covers you for your entire life.

Provided you keep up with your premiums, the loved ones you name on the policy, known as beneficiaries, would get the tax-free cash payout when you pass away. Some policies also include cover if you’re diagnosed with a terminal illness and have less than 12 months to live.

How does whole of life insurance work?

With whole of life cover, you pay monthly or yearly premiums and your beneficiaries receive a lump sum payout when you die. With some policies, you can stop paying premiums after you reach a certain age or have paid premiums for a certain period of time, and your cover will continue.

Your premiums and cover amount are typically fixed for life and when you die, your beneficiaries will receive the tax-free cash payout, which insurers call the death benefit.

What are the different types of whole cover life insurance?

The following types of whole of life cover are available:

Standard whole of life cover

Also called life assurance, this is where your cover lasts for life. You pay regular premiums and the cover amount stays the same. You may not have to pay premiums beyond a certain age, such as when you reach 90, but your cover continues. The insurer pays out a lump sum whenever you pass away.

Over 50s life insurance

This type of cover also lasts for life, but you can only apply for it if you are over 50. You choose your monthly premium or cover amount, and you will usually be accepted without having to have a medical or answer health questions.

It’s important to know that with over 50s life insurance, after a certain number of years, you may pay more in total premiums than the amount your insurer will pay out. The cover amount offered is also usually lower than standard whole of life cover or term life insurance.

Are there other types of whole of life cover?

There are also investment-based whole of life policies. If a policy is linked to investments, the insurer invests your money, and your premiums and cover amount can change in line with how the investments perform.

We’re only looking at standard cover on this page, which is also the only whole of life insurance our partner LifeSearch offers. If you are considering investment-based cover, talk to a qualified financial adviser before going ahead, so you fully understand the risks and well as any benefits.

Pros and cons of whole of life insurance

If you’re wondering which type of life insurance would suit you, here’s a quick summary of some of the benefits and drawbacks of whole of life insurance:

Pros

  • The payout is guaranteed as long as you pay your premiums, so it’s protection for a lifetime.
  • The cash payout when you die is generally tax-free. Though in some cases it may be liable for inheritance tax (IHT), depending on whether your policy is in a trust, and the value of your estate when you die.
  • The money could go towards anything from your funeral costs to paying a possible IHT bill.

Cons

  • It’s usually more expensive than a term life insurance policy.
  • With over 50s life insurance, you may pay more in premiums than the eventual payout amount.

How much whole of life cover do I need?

It depends on what you want the payout to help cover, but also what you can afford, as you will be paying premiums for life, or at least up to a specific age on your policy.

You might consider if your loved ones would benefit from using cash to cover these type of costs:

  • paying off a mortgage
  • repaying other debts
  • inheritance tax liabilities
  • funeral costs
  • everyday outgoings, such as mortgage payments
  • education costs
  • life milestones, such as a wedding or first car
  • childcare costs

Is whole of life cover worth it?

If it’s important that your loved ones receive a payout whenever you pass away, you may feel it’s worth it to have that peace of mind.

But if their needs might be less over time, perhaps when children are likely to be financially independent or when a partner retires, or when you will have (all being well) paid off your mortgage, you could consider term life insurance as an alternative, which usually costs less. Just be aware that if you outlive a term cover period, there will be no payout and you won’t get your premiums back.

Only you will be able to say if life insurance is worth it, though, based on your own circumstances. For example, you may have a lot of assets that your family could use to support themselves, or already have life insurance through your employer and feel it’s not worth it for you.

How much does whole of life insurance cost?

Whole of life cover usually costs more than term insurance, as there are no time constraints and the insurer knows it will have to pay out whenever you pass away. What you pay depends on many factors, including your age and the amount of cover you need.

If you’re looking to reduce the premium you pay for life insurance, it can help if you:

  • take out cover when you’re younger
  • don’t smoke, are a healthy weight and live a healthy lifestyle
  • don’t have a risky job or hobby
  • avoid getting more cover than you need

How can I compare over whole cover insurance?

When you’re looking at whole of life policies, you’ll want to consider:

  • Are the premiums fixed or are they reviewed over time?
  • Are the premiums affordable?
  • Is there an option of a payment holiday or a waiver of payments if you are unable to pay your monthly premiums because ill health or injury stops you from working?

Prices vary across providers and types of whole of life cover, so shopping around can help you find the cover that’s right for you at an affordable price.

It can be a complicated type of cover, especially if you are considering putting your policy into a trust to help reduce your IHT liability. So speak to a financial adviser if you’re not sure about the best type of cover for you.

We don’t offer online quotes for whole of life cover, but you can contact LifeSearch for advice and a quote. Just fill in this short form and an adviser will be in touch.

Whole of Life Insurance FAQs

How do I make a whole cover insurance claim?

To make a claim on a policyholder’s policy, tell the insurer that the policyholder has died as soon as possible. You can do this by calling the claims department or making a claim online or by email. It will help make the process easier if you have the policy number handy.

You are likely to be asked about your relationship to the person who has died and their cause of death, along with your contact details.

The insurer should explain the process and take it from there. If the claim is accepted, the insurer will pay out and explain the timeframe.

Is whole of life insurance a good idea?

It won’t suit everyone, and you might not even need it if you have other ways to leave enough money for your loved ones. Your life insurance policy has to suit your finances and commitments, and be affordable for you.

If you don’t want a time-constrained policy, you may want to consider a whole of life policy. But if you would only need the cover until your children leave home or a debt is paid off, and are looking for more affordable premiums, you might want to consider term life insurance and get a quote for that too.

» COMPARE: Get a quote for term life insurance

What happens when you cancel a whole of life insurance policy?

You can cancel your policy whenever you like, but your premiums won’t be refunded and you’ll get nothing back if you cancel.

If you cancel a life insurance policy within the first 30 days of the start date, called the cooling-off period, the insurer will refund your premiums and your cover will end.

Cancelling a life insurance that’s in a trust is a bit more complicated and the trustees would need to give their permission.

If you decide to cancel a joint policy, perhaps after you separate from your partner or when your kids are no longer financially dependent on you, you may be able to take out a single policy instead. Though, as you will be older than when you took out the previous policy, your premiums may be higher.

Is whole of life insurance taxable?

There is usually no income tax or capital gains tax due on a life insurance payout when you die. However, unless the policy is written into a trust, where it’s treated separately from your estate, the payout may not be free of inheritance tax. The current threshold is £325,000, and the value of your estate that is above that amount would be liable for a 40% inheritance tax bill.

Trusts can be complicated and can have drawbacks, so talk to a financial adviser or estate planner before setting one up to see if it’s right for you.

Does whole of life insurance always pay out?

A big plus to whole of life cover is that the payout will be made whenever you die, as there is no time limit. There are some circumstances where an insurer may not pay out, though. Insurers won’t pay out if:

  • You stop paying your regular premiums.
  • You weren’t truthful in your answers when you applied, such as not being open about health conditions.
  • There is a suicide clause included in your policy and you take your own life or die through self-inflicted injury within a stated time period from the start of the policy.

It’s worth knowing that most life insurance claims are paid out. According to the Association of British Insurers (ABI) and Group Risk Development (GRID), in 2021 insurers paid 99.99% of whole of life insurance claims.

Does whole of life insurance pay out at death?

Yes. A whole of life insurance policy pays out a cash lump sum whenever you pass away. This is provided you have kept up with premiums and the cause of death is covered by the policy.

Once your insurer has been told that you have died, it will put the wheels in motion. It may pay out within a week but, unless your policy is in a trust, the payout wouldn't be received by beneficiaries until the executor of your will has grant of probate. Some insurers offer an advance funeral payment to help with the cost of the funeral or probate fees.

Can I get a joint whole of life policy?

Yes, it’s possible to get joint whole of life cover. A joint policy is usually cheaper than two single life insurance policies.

With joint cover, if it’s a first-death policy, the payout is to the survivor and the policy ends after that. With second-death policies, which are less common, the payout doesn’t happen until both policyholders have passed away. This may be useful for inheritance tax planning, to help cover a possible inheritance tax bill.

Can I get whole of life insurance with no medical exam?

It is possible. Over 50s life insurance is a type of whole of life cover that often involves no medical exam and no health questions, and guarantees a payout. Keep in mind that you could end up paying more in premiums than the eventual payout, depending how long you live and when you took out the policy.

When you apply for other types of whole of life insurance you will be asked about pre-existing conditions and other health questions, such as whether you smoke or are a heavy drinker. Some insurers may ask you to have a medical if, for example, you have a health condition. The insurer may ask for more information about your medical history from your doctor (with your permission) before working out your premium or deciding if it can offer you cover.

If you are young and in good health you may find that standard policies with health questions or medical exams as part of the application process provide cheaper premiums than over 50s cover. That’s why it’s sensible to consider different types of life insurance before making a decision.

About the author

Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years. Read more

This life insurance comparison and quote service is presented via our partnership with LifeSearch Limited. The information you provide is used to generate quotes from LifeSearch. Nerdwallet Ltd does not form part of the service beyond presenting quotes.

LifeSearch Limited is registered at Wentworth House 440 Parkway, Solent Business Park, Whitely, Hampshire PO15 7FJ and is an Appointed Representative of LifeSearch Partners Limited and regulated under the Financial Conduct Authority ref: 402349.

LifeSearch Limited is not part of Nerdwallet Ltd or other Nerdwallet entities.

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