Whole of Life Insurance
Unlike term life insurance, whole of life cover does not have an end date. It stays in place for your entire life until you die and guarantees a payout, as long as you keep paying your premiums.
That guarantee is the whole point. And it is also why it costs significantly more than term cover.
Is it right for everyone?
Honestly, no. For most people who are working, raising a family, or paying off a mortgage, term life insurance offers far better value. Whole of life tends to make sense in specific situations where you need certainty of a payout, no matter when that day comes.
It is important to understand who should and who should not take up this cover.
Reasons why a person should take up this cover:
- Covering funeral costs – a smaller guaranteed lump sum so your family is not left with unexpected expenses at an already difficult time
- Leaving a guaranteed legacy – if you want certainty that a fixed amount will be paid to your loved ones, regardless of when you pass away
- Funding inheritance tax – when structured correctly, whole of life can be used to cover a Capital Acquisitions Tax bill, protecting your estate for the next generation
People who should not be taking this cover:
- If you are still paying a mortgage
- If you need to replace income during your working years
- If you need a larger cover while your children are still dependent on you
- If your budget is already stretched
In these circumstances, term life insurance is almost always the better starting point.
One thing worth knowing: Guaranteed vs Reviewable policies
There are two types of whole of life cover. With a guaranteed policy, your premium is fixed from day one hence no surprises. With a reviewable policy, the insurer can increase your premium at set intervals, sometimes significantly as you get older.
A balanced approach
For many people, the smartest option is a combination, a larger term policy that covers the heavy lifting during your working years, topped up with a smaller whole of life amount that continues once the term ends. You get the protection your family needs now, with a guaranteed lump sum later, without committing to the full cost of a whole of life policy from the start.
