The Pros and Cons of Whole of Life Insurance

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Whole of life insurance definition

Whole of life insurance (WoL) is guaranteed to pay out when you die. Whole of life cover epitomises the idea of life insurance, making sure your loved ones get financial stability when you die.

It lasts the whole of your life, you pay for it for the whole of your life and you have security for the whole of your life.

But what are the pros and cons? Are whole of life insurance policies worth it?

The benefits of whole of life insurance

It lasts the whole of your life

Surprisingly for many, not all life insurance policies actually last for your entire life. In fact, whole of life insurance is the only one that does!

Compare this to decreasing term insurance, designed to cover a mortgage if you should die before the house is fully paid off. DTA (decreasing term assurance) simply stops covering you when the term runs out. The house is paid off, and you are relieved, but should you die the next day, your family receives nothing.

Or level term assurance (LTA). With level term insurance, you have the guarantee of a large lump sum to be paid to your beneficiaries upon your passing, but only for a few years. It’s there to provide a safety blanket for your partner and children during your working life, or while your children are still living at home and going through education, but in your retirement, most level term policies are well passed and all-but forgotten about. Should the worst happen then, there’s nothing available to help pay for anything.

Whole of life assurance is guaranteed to last forever. If you keep up the regular monthly payments, you know that the money is there waiting. It’s not a replacement for you, but it’s a help to stop those who are grieving having to deal with the financial impact of your death as well as the significant emotional one.

It provides security

People talk all the time about life insurance giving your family a financial payout, but less often is it mentioned that you get the huge emotional and psychological benefit of a weight lifted. Worrying about your family and how they would cope in your absence is a typical thing and for many people, it can keep them up at night for hours. When you have a solid insurance plan that guarantees payment no matter when or how you pass away, that worry is simply gone.

For many people, the cost of whole of life premiums is a minor price to pay for such security.

It’s easily understood

Though not the largest benefit, the pure and simple nature of whole of life insurance makes it a breath of fresh air in a complicated field. Knowing that you fully understand your life insurance package is a bonus in itself.

The disadvantages of whole of life insurance

Higher premiums

Whole of life cover is completely guaranteed. Unlike many other types of life insurance that can run for a certain time and then become invalid, whole of life just keeps on going. While this is a benefit for the most part, it also means that the insurance company know they are going to have to pay out at some point. It’s not a gamble for them – it’s a complete certainty.

In order to mitigate this level of certainty, the insurance company make sure that they are as likely as possible to not be out of pocket, and they set the premiums such that if you live an average life into old age, you will have paid enough into the policy to put them in profit.

It’s not greed, it’s simple business but it does mean that whole of life insurance is more expensive than level term or decreasing term insurance.

What they are offering you is the reassurance that no matter when you die, they’ll see your family paid, but they can’t simply offer policies that’ll see them out of pocket.

The most obvious comparison to whole of life insurance would be a savings plan:

Life insurance: A £50,000 policy paid at £120 / month will take 35 years before you have paid in more than will be paid out. Assuming the policy was taken out at 30 years old, this means at 65, the insurance company will begin to be in profit (fees and other considerations ignored).

Savings: £120 paid in per month from age 30 will result in £50,000 in the account by 65 (interest and other considerations ignored).

At 40, life insurance will pay £50,000, savings will pay £14,400
At 50, life insurance will pay £50,000, savings will pay £28,800
At 60, life insurance will pay £50,000, savings will pay £43,200
At 70, life insurance will pay £50,000, savings will pay £57,600
At 80, life insurance will pay £50,000, savings will pay £72,000

Life insurance is there to look after your family in the case of an accident. No one plans to die before they are 65, but do you want to take the risk?

There are no other disadvantages to whole of life insurance. Other than the higher cost of the premiums, whole of life insurance really does provide a premium level of cover!

Should I buy whole of life insurance?

Like all types of life insurance, the cost of your policy is based on your health and age. This makes sense – after all, the life insurance company is basing the cost of your premiums on how long you might live before it is all paid back.

Consequently, the cheapest life insurance is that taken when you are younger and healthier – buying it sooner rather than later is always best!

A whole of life insurance policy is designed to provide money that will always be needed. It’s a poor choice to use for paying off a mortgage as the low cost of a decreasing term policy designed for that purpose is always going to be superior. It’s fighting a losing battle against level term insurance when it comes to making sure there’s money for a young family in the case of a fatal accident – level term is cheaper and if you are worried about replacing your salary as a breadwinner then it is a much better fit.

But, if you are looking to provide money for an inheritance, to be put in trust to pay an expected inheritance tax bill or just a small amount to cover funeral expenses, then whole of life insurance is a perfect choice.

I am older and have been sick in the past – will I be able to get whole of life insurance?

Give us a call at Quick Quote Protect today and we’ll be able to help you with an Over 50s whole of life package. Over 50s life insurance is a guaranteed acceptance whole of life insurance policy with no medical questions asked. The premiums are a little higher than a standard whole of life policy, but it ignores any pre-existing medical conditions and makes sure you will have some level of cover for your family.

Fill in our contact form or pick up the phone and give us a call today to find out more about whole of life insurance or to see how great a deal we can do on a life insurance policy for you.