How does whole-of-life cover work?

10 April2021

When buying life insurance it can be hard to know how long you'll need it for. This is one reason why many people invest in whole-of-life insurance. This lasts for the rest of your life and is guaranteed to pay out as long as the terms of the policy are met. This makes it a very reliable kind of life insurance, although it is often more expensive than 'term' life insurance (which only lasts for a fixed amount of time).

How expensive is it?

The cost of whole-of-life insurance is affected by the usual individual factors that affect all kinds of life insurance. For example if you are older your premiums may be higher. Being male may also increase your insurance, as women tend to live longer. If your work is considered dangerous by your insurer this may also affect your premiums. Other factors that affect cost can include any relevant conditions in your medical history and being a smoker.

How is it different to other kinds of life insurance?

Whole-of-life cover is different to term based life insurance policies. The biggest difference lies in the duration - whole-of-life policies last until you die whereas term-based policies only last for as long as you want them to. When buying term-based insurance you can decide how long you want it to last, for example twenty years. The idea of this is to only buy as much cover as you need. If your family would only need the insurance payout to help with a mortgage, for example, you may not need life insurance after you have paid the mortgage off.

The amount your family could receive is also different with term-based policies. With level term cover you decide how much you want your loved ones to get depending on how much you can pay per month. These figures remain fixed throughout your policy. Decreasing term cover is different because the size of the potential payout gets smaller as your policy goes on. It is also usually cheaper than whole-of-life and level term cover. It is geared towards people who think their financial obligations will gradually reduce as their policy continues.

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