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Whole of life insurance offers lifelong protection and a guaranteed payout. In this guide, we’ll share everything you need to know about whole of life cover, including the different types, advantages and disadvantages, and what the UK’s leading whole of life insurance providers offer.
Whole of life insurance is a type of life cover that pays a specified lump sum of money to your beneficiaries when you pass away or if you become terminally ill. Sometimes, you’ll see it called ‘life assurance’.
Like the more common term life insurance, you select the amount of cover that you need and pay your premium every month or year. What makes whole of life insurance different from term life insurance is that it never expires. As long as you keep to the terms and conditions of your policy and maintain your premiums, your loved ones are guaranteed a payout when you pass away.
There are three main types of whole of life insurance policies:
In this guide we will mainly concentrate on standard whole of life insurance and over 50s life insurance which are the most common types now available.
Whole of life insurance can work slightly depending on how you set it up and the options you choose, but one thing remains consistent: your cover has no expiry date.
If you select to pay guaranteed premiums the amount you pay each month or year and your cover amount will stay the same from the start of your policy until you pass away. However, it is worth noting that some providers offer an increasing cover option to safeguard the purchasing power of your payout against inflation. If you choose increasing cover, both your premiums and the payout amount will rise each year.
Alternatively, some insurers offer reviewable premiums. These start lower than guaranteed premiums but are reviewed regularly by your insurer, often after 10 years and then every five years thereafter. Since the cost of life cover rises with age, reviewable premiums can increase significantly at each review, sometimes making them more expensive than a guaranteed premium. If the new premiums become unaffordable you may have to reduce your cover.
To ensure you choose the right life insurance plan for your needs, it's a good idea to consult with an independent financial adviser or insurance broker.
Opting for a reviewable premium may seem tempting when you see the lower initial cost, but remember that regular reviews will push the price higher and introduce an element of uncertainty. Think about whether you are more comfortable with a guaranteed premium that you feel confident that you could budget for over the long term.
As well as providing a lump sum that can help your family maintain their standard of living and pay off debts, whole of life insurance can be particularly useful if you:
There are a wide range of benefits of life insurance, and many of these apply to whole of life insurance as well. But what are the benefits specific to whole of life insurance compared to term life insurance?
Compare the UK's leading life insurance providers and get expert advice from an experienced insurance specialist.
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However, there are also downsides to whole-of-life insurance which could put you at a disadvantage, compared to a term life insurance plan, or make it unsuitable for you. These include:
Compared with term insurance, you’ll usually find that quotes for whole of life insurance are more expensive. This is because the payout is guaranteed, so the risk lies entirely with the insurer. The only question is how long they’ll be able to collect premiums from you until they have to pay out. With term life insurance, there’s always a chance the policy will expire before the insurer has to pay out.
Here are some of the factors insurers use when calculating your life plan premium prices:
Cost will be an important reason behind the whole of life insurance plan you choose as it will need to be affordable for you, both now and in the future. However, you shouldn’t focus entirely on the price tag. Here are some other factors you should consider:
Request a free comparison quote, and we’ll connect you with an experienced life insurance specialist to help you find the best policy at the best price.
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While the payout from a whole of life insurance plan is exempt from income tax and capital gains tax, it may have inheritance tax implications after you pass away.
When you pass away, the payout from your beneficiaries’ life insurance claim is included as part of your estate. That means it counts towards your inheritance tax threshold.
If the total value of your estate exceeds the inheritance threshold, you will be liable to pay inheritance tax at 40% on everything over that threshold.
The standard threshold for inheritance tax is currently £325,000, but this can increase if you leave money to your spouse or civil partner, give your home to your children or grandchildren, or donate money to charity.
It’s always advisable to speak to a financial adviser about your inheritance tax liability.
It’s possible to protect the payout from your whole life insurance plan from inheritance tax by getting it ‘written in trust’.
When you put your life insurance in trust, it’s not considered part of your estate and, therefore, not liable for inheritance tax. It may also mean your beneficiaries can access their payout faster, as it does not need to go through the probate process.
An expert solicitor, insurance broker or financial adviser can help you make the right decision on your life insurance and inheritance tax.
Not all big insurance providers in the UK offer whole of life insurance, so your choice of providers is more limited compared with other types of life insurance such as term assurance. Here's an overview of some of the main whole of life insurance providers (in alphabetical order) and the types of policies they offer:
Aviva’s whole of life insurance product is available on a single or joint basis. The minimum level of cover available is £30,000 and the maximum is £10 million. Aviva offers two cover types - level cover and increasing cover. The upper age limit for acceptance is 79-years-old.
Policyholders also get access to Aviva’s DigiCare+ app which offers health and lifestyle advice, bereavement support and other benefits, all reachable from your phone.
In 2023, Aviva paid out on 99.3% of life insurance claims. The Aviva Whole of Life Insurance+ product is rated 4* by Defaqto.
Legal & General offers whole of life insurance to those aged between 18 and 84. The maximum cover amount depends on your age but if you’re aged 69 or under, you could access a cover level of up to £5 million.
Premiums are guaranteed and there is an option to increase your cover amount in line with any changes in the Retail Prices Index (RPI). Legal & General policyholders also get access to wellbeing support over the phone.
L&G’s most recent life insurance payout rate (for 2023) is 97%. The Legal & General Whole of Life Protection Plan has a 4* rating from Defaqto.
Royal London offers a range of whole of life plans, including joint life policies, guaranteed premiums, reviewable premiums and increasing cover. To be eligible for cover, you must be a UK resident between the ages of 18 and 89.
You can add a waiver of premium, which allows you to stop paying your monthly premiums if you can’t work due to illness or injury. Royal London includes access to its Helping Hand service offering practical and emotional support for policyholders and their families.
Royal London’s most recently published payout rate across all of its life insurance is 99.4%. Its Pegasus Whole of Life Plan has a 5* Defaqto rating.
Vitality offers whole of life cover with a wide range of premium options, optional extras and rewards. It allows policyholders to change their cover at any time. You can also add LifestyleCare cover, a unique feature which can help you pay for any expenses if you develop later-life conditions such as dementia.
Vitality is famous for its customer rewards. Life insurance policyholders can qualify for free or discounted products from Apple and Garmin. They can also get 50% off Virgin Active gym membership.
Vitality paid out 99.7% of its life insurance claims in 2023. The Vitality Personal Protection Plan is 5* rated by Defaqto.
Zurich provides whole of life insurance with a minimum premium of £8 per month or £80 per year. You can get cover on a single life basis at any age between 16 and 83. Terminal illness cover comes as standard.
There is a range of cover options, including increasing your cover amount by 3% or 5% each year, or linking it to inflation (RPI). You can also add a 6-month waiver of premium for an additional cost. Access to Zurich’s Support Services, which offers a health and wellbeing service and professional counselling, is included as part of the policy.
Recent figures show Zurich paid out on 98% of life insurance claims in 2022. The Zurich Whole of Life plan has been awarded 4* by Defaqto.
Whether whole of life insurance is worth it for you depends on a range of factors and your protection needs.
However, if you are determined to leave your beneficiaries a sum of money in the event of your death, whole of life can be a good option. This is because the cover lasts a lifetime so never expires. You can rest assured that your loved ones will receive a payout regardless of when you die.
You’re guaranteed a payout as long as you haven’t done anything to break the terms and conditions of your policy. These include:
Whole of life is well suited to long-term protection but if you only need cover for a specific period such as to protect your family from debt if you pass away unexpectedly, or provide financial support until your children become independent, term life insurance may be a better option.
For example, if you have a 20-year mortgage for £200,000, you could take out a term life insurance that covers this amount for the same period. Once you’ve paid off your mortgage and your policy expires, you may no longer need life insurance.
You can read about the different types of life insurance in our guide.
While term life assurance is fairly straightforward to understand, there are some common misconceptions that people have about whole of life insurance. So let’s take a look at them and explain the truth:
Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.
Mike is a personal finance copywriter who has written for numerous financial services publications and websites over many years.
Because whole of life insurance never expires, you usually have to pay premiums to your insurer until you pass away.
The exception is some over 50s life insurance policies that let you stop paying at a certain age (around 90) but still maintain your coverage. Check the Ts and Cs of your policy when you make your purchase.
When you’re evaluating what life insurance to purchase, make sure you factor this in. Budget to carry on paying premiums for a long time after you buy your policy.
In most cases, if you stop paying your premiums, your policy automatically invalidates. You’ll no longer be covered if you pass away, and you won’t receive any money back that you’ve paid in premiums.
However, all insurers offer different terms and conditions, so if you feel that you can’t pay anymore, make sure you talk to them to see what your options are. Don’t just stop paying your premiums.
Many providers also allow you to add a waiver of premium to your policy, which is designed to cover your payments for a specified time if you’re unable to work due to injury or illness.
Standard whole of life insurance plans do not have a cash-in value at any stage. However, whether or not you can cash out other types of whole life plans such as investment-linked policies, depends entirely on your insurance provider and the terms and conditions of your policy.
Yes, most insurers offer joint whole of life policies. Depending on the insurer, these can be set up on either a joint life first death basis (where the payout is made when the first person covered dies) or a joint life second death basis (where the payout is made only after both people covered have passed away).
Keep in mind that if your joint life policy pays out upon the first death, the surviving partner may be left without coverage. Make sure you select the right policy for your personal circumstances.
Yes. While many insurers may not offer whole of life cover to people who have pre-existing health conditions (or make it extremely expensive), over 50s life insurance does not ask you any medical questions when you purchase your policy. Over 50s life insurance is guaranteed acceptance.
When you first take out your life insurance plan, you’ll have a 30-day cooling-off period where you can cancel without charge if you change your mind.
After your cooling-off period, you can cancel your policy with your insurer, but you’ll lose all your cover and you won’t be able to get any money back.
