What is whole-of-life insurance?
Whole-of-life insurance , as the name suggests, is life insurance that lasts for the rest of your life. It is a popular option for people who want to leave some money behind for their dependants no matter what happens. It can provide you with great peace of mind because, as long as the terms of the policy are met, a payout is guaranteed.
How much does it cost?
Several personal factors affect the cost of whole-of-life insurance. These include your age (as you get older your insurance usually becomes more expensive). If you have a dangerous job or you are a smoker your premiums will also be higher.
The cost of whole-of-life insurance is also more than other policies in general. The insurer almost certainly has to make a payment at some point, so they compensate for this with higher prices.
Another factor that can affect the price of whole-of-life insurance is whether your premiums are renewable or guaranteed.
- Renewable premiums are usually quite low at the beginning of your policy. Your insurer has the right to look at your insurance and raise the price at regular intervals. These intervals vary depending on your insurer and policy. As you get older your premiums may be raised significantly. This means that you could end up paying substantially more as your policy continues.
- Guaranteed premiums look more expensive than renewable ones at first. They are guaranteed not to rise, however, unless you agree that you want the final payout to be larger. This means that they may be cheaper in the long run.
What other kinds of life insurance are there?
Investing in whole-of-life insurance is a big commitment. You have to be completely sure that it is the right policy for you, because you will have it for the rest of your life (unless you cancel - but you wouldn't get back any of the money you've put in). If you want life insurance primarily for paying off your mortgage or supporting your children, term life insurance may be more suitable. This is because you are only paying for the exact amount of life insurance that you need. Eventually your mortgage will be paid off and your children will be able to support themselves financially.
Level term cover could still provide you with as large a cash sum as you need. The more you pay per month, the more your family could get if you die while the policy is active. The amount you pay per month and the size of the final payout remains fixed from the beginning of the policy. This means you know exactly what you are paying for.
Decreasing term coveralso only lasts for a fixed term, but size of the payout is not fixed. It deceases as time goes on. This may not be the policy for you if you want to leave your family a substantial amount of money, but it may be suitable if you want to pay off a mortgage, as the size of this will also shrink over time.
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Related resources
- How does whole-of-life cover work?
- What are the different types of life insurance?
- Level term life assurance: what is it?
- Decreasing term life assurance: how does it work?
- What type of life insurance is best for young people?
- What services do life insurance companies provide?
- Term life assurance explained
- Compare life insurance quotes
Tags: insurance, life insurance, smoking, critical illness, renewable premiums, guaranteed premiums, mortgage