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Whole Life Insurance Guide

Whole Life Insurance Guide

Category: Insurance

Updated: 20/01/2017
First Published: 15/05/2013

The ins and outs of whole life insurance

Whole life Insurance is designed to provide cover for an individual's life, and pay out a lump sum when they die. However, whole life insurance differs from term assurance, because term assurance is only taken out over a certain amount of years. With whole life insurance, your beneficiaries are guaranteed a cash sum when you die regardless of the age you live to.

  • You will need to pay premiums throughout your life or until you reach a certain age, when premium payments could stop but your cover continues.
  • Whole life insurance policies are generally more expensive than life assurance because the insurer will definitely need to pay out in the event of your death.
  • Critical illness: is a slightly different form of cover, yet still related. Here, a lump sum is paid in the event of diagnosis of certain critical illnesses. You can save money by combining term insurance with critical illness cover. However, depending on the policy type, this may provide a single payout should death follow a critical illness diagnosis, rather than two payouts if cover is obtained separately.
  • Waiver of premium: if illness prevents you from working, your monthly premiums are paid on your behalf after a set deferment period. Check your quote's Key Facts document for each quotation produced.
  • Trusts: can the policy be set up in a trust? This can avoid delays in money going to dependents and can avoid the risk of having to pay inheritance tax.

Why may I want to take out whole life insurance?

  • To pay for funeral expenses so your family don't have to meet the costs.
  • To clear any outstanding debts you may still have.
  • To help any dependents maintain their standard of living.
  • If you have a significant estate, it could be used to pay your inheritance tax bill before it can be passed on.

Before you begin, consider the following

  • The terms and conditions of whole of life insurance policies vary so you need to make sure you understand the ins and outs of the cover being offered before signing on the dotted line.
  • Your policy must be appropriate for your circumstances and requirements.
  • Speak to an independent financial adviser about your life insurance needs.
  • How much do you want your beneficiaries to be paid in the event of your death? This needs to be enough to cover any outstanding debts, and to provide for any replacement income that may be lost because of your death.
  • Think about how much you can afford to pay each month, both now and in retirement.

What to watch out for

  • Don't be swayed by free gifts or initial cover if you take out a policy.
  • Some policies won't ask you any medical or health questions, but as a result, these are likely to come with quite limited cover.
  • Look out for the plans that guarantee your premiums will never rise for the life of the plan. These may be more expensive initially.

Using a life insurance broker

Moneyfacts.co.uk has partnered with Active Quote to help you find the best life insurance deal. Complete the simple, no obligation form and they will compare leading insurers to find you the right policy. Please note that they cannot quote for whole of life insurance, just term insurance.

What next?

Get a free, no obligation life insurance quote from Active Quote.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.