Life insurance plans : Whole of Life

There are many names used for this simple product, while some providers confuse you by just calling it Life.

For most people, it makes sense to avoid complex life policies and go for the cheapest and simplest.

Whole of Life Insurance is a policy that will pay out on death whenever this occurs.

You pay the premiums throughout your life or until you reach a certain age, when premiums stop but cover continues.

It may guarantee a payout, but if all you want is a to protect your family against an unexpected early death, can be an expensive way of doing so.

Whole of Life cover is usually relatively expensive since the insurer knows that eventually the policy will definitely have to pay out – unlike term assurance which lapses at the end of the term.

The idea of eventually getting something back from all the premiums is what attracts many consumers to the idea of Whole of Life cover, but you actually pay a very high price for this-it can be several multiples of what you pay for term life.

Remember not to just compare the annual premium, but the expected cost over the whole policy period-which you hope may be a lot longer for Whole of Life

Whether you get a good return on the premiums you pay depends on how long you live. So Whole of Life often mixes up investment and life insurance, which hides the true insurance cost.

This type of cover is much more expensive that basic term assurance, as it includes an element of investment as well. The aim of the investment element is to provide a subsidy in later life to keep the cost of premiums lower.

Premiums are not guaranteed for the whole of the policy, and are generally reviewed every five years. If the investment element is performing well it is possible that premiums will never need to rise, but the converse is true also.

A whole of life policy should not be used as an investment, as there are better alternatives. If you have money to invest, you are likely to be better off choosing other investments and sticking to a term policy to provide your life assurance.

We do not profile investment based whole life policies.

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