What Does A Whole Of Live Insurance Policy Mean?

Written by Jane Wardle on February 11, 2019

Updated April 15, 2023


Understanding all the various options available when it comes to life insurance can be confusing, and it isn’t always easy to think about what will be best for your loved ones in the event of your death. It is important that you properly understand your life insurance options, and what they will mean for your family once you are gone.

A popular option is whole of life insurance, which means your family will receive a payout when you die, no matter your age. If you are considering whole of life insurance, then read on to find out what it is, the various types and how much it costs.

What is whole of life insurance?

Whole of life insurance is a type of life insurance that will ensure that no matter what age you are when you die, your family will receive a lump sum of money from your insurance provider. These policies are designed to last for as long as you do, and guarantee that when you pass away, your family will have financial stability.

Whole of life policies work in a very different way to term policies, which are a more common choice for many people. Term insurance will only last for a predefined period of time, and you select how long you want to be covered when you take out the life insurance policy.

With term insurance, if you live longer than then plan covers you for then your family will receive nothing, and your plan will have no cash value. For this reason, term insurance is often much cheaper than whole of life insurance, as there is no guarantee that the insurance company will ever have to pay out.

Most whole of life insurance policies will offer fixed premiums, guaranteed death benefits and various tax benefits for your beneficiaries. This means that a whole of life policy provides both a savings feature and life insurance.

What are the different types of whole of life insurance?

Whole of life insurance policies can be split into two main types, and it is important to properly understand both and know the differences in order to choose which is best for you and your family. The two main types of whole of life insurance policies are:

  • Balanced cover: Balanced cover is also sometimes known as standard cover, and it means your premiums will stay the same throughout your policy. You are guaranteed to always pay the same amount towards your insurance, even as you get older and if your health deteriorates. Balanced cover whole of life policies will have a fixed cash payout when you die, and the amount of this payout will be agreed with your insurance provider when you take out the policy.
  • Maximum cover: A maximum cover policy means that your cover is linked to an investment fund. Your whole of life insurance provider will invest the money you pay into an investment fund, and hopefully, the return generated from this investment will cover the cost of your payout when you die. Monthly premiums will not be fixed as with balanced cover and will be reviewed periodically depending on how the investments are doing. If the investment is not doing as well as your insurance company hoped, then they may increase your premiums or reduce your payout amount.

Maximum cover whole of life policies are generally cheaper initially, compared to balanced cover policies. However, as your premiums can increase quite significantly over time, they often don’t end up being cheaper in the long run.

How much does whole of life insurance cost?

Compared with other types of life insurance, such as term life insurance or family income benefit insurance, whole of life insurance is generally more expensive. This is because your life insurance policy provider is guaranteed to have to pay out your lump sum at some point in the future, whereas with other policies there is a chance nothing will have to be paid as you may live longer than the term.
The cost of a whole of life insurance policy will be based on various different factors including your age, your health, your lifestyle and how much cover you want.

Most whole of life insurance policies only require you to make monthly premium payments up until a certain age. Typically, you will stop paying when you reach 90, although this depends on the insurance company and policy so check thoroughly before taking out whole of life insurance.

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