Whole of Life Insurance Policy

Whole of life insurance provides lifelong financial protection for the people you care about most. This means your loved ones receive a guaranteed payout whenever you pass away, providing security and peace of mind at an emotionally difficult time. Whether you want to protect your estate, manage inheritance tax, cover funeral costs or leave a legacy, our expert advisers can provide clear, honest guidance and whole-of-market access.

What is Whole of Life Insurance?

Whole of life insurance is a type of permanent life insurance that guarantees a payout to your beneficiaries no matter when you pass away, as long as the policy is active. Unlike term life insurance, which only covers a set period, whole of life cover lasts your entire life. It is commonly used for:

• Leaving an inheritance
• Covering funeral expenses
• Protecting family finances
• Meeting long-term commitments or liabilities
• Managing potential inheritance tax (IHT).

This type of cover is especially valued by those wanting a predictable, guaranteed element within their estate planning strategy.

How Does a Whole of Life Policy Work?

When you take out a whole life insurance policy, you agree to pay regular premiums, either monthly or annually. In return, the insurer promises a fixed payout amount when you pass away. Here’s a breakdown of how it works:

• Premium Payments: You pay premiums over the life of the policy. These rates are typically higher than term life insurance because of the lifelong coverage.
• Cash Value Component: A unique feature of whole life insurance is that it often builds up a cash value over time. This means a portion of your premiums is invested, allowing the policy to accumulate a tax-deferred savings component.
• Guaranteed Payout: The sum assured is paid out to your beneficiaries upon your death, ensuring financial support when it’s needed most.
• Lifetime Cover: Your policy covers you for life. There is no expiry date and the payout is guaranteed as long as premiums are maintained.

Is Whole of Life Insurance Worth It?

The value of whole of life insurance depends on your individual needs and financial goals. Here are some factors to consider:

• Long-Term Financial Planning: If your goal is to leave a legacy or cover inheritance tax, this policy can be highly beneficial.
• Guaranteed Payout: Unlike term insurance, whole of life cover ensures a payout, which provides peace of mind to your loved ones.
• Cost Considerations: While whole life insurance rates are higher than term insurance, the lifelong benefit may outweigh the cost for those needing permanent coverage.

What Types of Whole of Life Policy Are There?

Whole of life insurance comes in several forms, each designed to suit different budgets, health situations and long-term goals. Understanding how they differ will help you choose the policy that gives your family the right level of lifelong protection.

Standard Whole of Life Insurance

This is straightforward coverage with fixed premiums and a guaranteed payout. Insurers will typically ask about your health and medical history, and in some cases may request a medical examination, so this type of cover often suits people in good health who want long-term financial certainty. It is frequently used to support estate planning, leave an inheritance or ensure funeral expenses are covered.

Over 50s Guaranteed Acceptance Cover

Over 50s policies are designed for people aged 50 and above who want a simple, guaranteed way to leave a fixed payout behind. Acceptance is automatic within the insurer’s age range and does not require any medical questions. Most providers apply a qualifying period, usually 12 to 24 months, before the full payout is available. These policies generally have lower payouts than fully underwritten plans, but their simplicity and guaranteed acceptance make them popular for later-life planning.

Investment-Linked Whole of Life Insurance

Investment-linked whole of life insurance includes an investment element, meaning part of your premiums are invested and the eventual policy value may grow over time. There are two main versions:

• With-Profits Policies 

These place your premiums in a pooled investment fund managed by the insurer. Returns are smoothed over time to reduce short-term volatility, and you may receive yearly bonuses as well as a potential terminal bonus if the fund performs well. The final payout includes a guaranteed minimum amount plus any bonuses added.

• Unit-Linked Policies 

These give you a choice of investment funds, and the value of the policy depends on how those funds perform. This introduces greater potential reward but also greater risk, as values can rise and fall.

Balanced or Maximum Cover Plans

Some policies review premiums periodically based on investment performance and the insurer’s assessment of risk. These plans can suit people who want a blend of flexibility and long-term protection but are comfortable with the possibility of premiums changing over time. There are two types:

• Maximum Cover Plans

The premiums are invested in a fund, and the insurer reviews the plan periodically. If the investments don’t perform well, you may need to increase your premiums.

• Balanced Cover Plans

A more stable option where premiums are set to balance the investment risk.

Joint Whole of Life Insurance

Joint whole of life insurance policies are available, usually designed for couples and often more cost effective than two individual types. The payout is typically made: 

• On first death – commonly used for funeral costs or protecting a partner
• On second death – often used for inheritance tax planning

How Much Does Whole of Life Insurance Cost?

The cost of whole life insurance varies based on several factors:

• Age: The younger you are when you take out a policy, the lower the premiums.
• Health: Pre-existing conditions can increase costs.
• Sum Assured: The higher the payout, the more expensive the premiums.
• Lifestyle Factors: Smokers and those with hazardous occupations typically pay more.

For example, a healthy 40-year-old could expect to pay around £50 to £150 per month for a medium coverage amount, depending on lifestyle and health status. Always compare whole life insurance rates with Ascot to find the best option for your needs.

How Much Could a Whole of Life Insurance Policy Pay Out?

The payout, also called the sum assured, depends on what you choose when setting up the policy. Typical amounts range from £100,000 to over £1 million. This figure is guaranteed, meaning your beneficiaries will receive the full amount when you pass away. Many use this to:

• Pay off a mortgage
• Cover funeral expenses
• Provide for loved ones or handle estate taxes.

For your beneficiaries to receive a large payout, you’ll likely have to pay high premiums. For investment-linked policies, the amount they receive will depend on how well the investment performs.

Is a Whole of Life Insurance Pay-out Tax-Free?

Usually, the whole of life insurance pay-out is tax-free. However, if your total estate exceeds the inheritance tax threshold, your beneficiaries may owe inheritance tax on the payout. Planning ahead can help minimise this impact.

Tip: Placing your policy in a trust can help ensure the payout isn’t subject to inheritance tax. Always consult with us for personalised advice.

Is Whole of Life Insurance Guaranteed to Pay Out?

Yes, one of the biggest benefits of a whole of life cover is that it is guaranteed to pay out as long as you keep up with your premium payments and your cause of death is covered by the policy’s terms and conditions. This makes it a reliable financial planning tool, especially for families wanting long-term security.

Does Whole Life Insurance Expire?

No, whole life insurance does not expire. As long as you pay your premiums, the policy will remain active for your entire life, guaranteeing coverage. Some policies only require you to pay for a fixed number of years or until you reach a certain age but in these cases, you will still be covered until you pass away.

Can I Cash in My Whole of Life Insurance Policy Early?

Yes, but it depends on the policy type. Some whole life insurance policies accumulate a cash value, which you can withdraw or borrow against. However, cashing in your policy early can reduce the payout your beneficiaries receive or leave you with less than you’ve paid in premiums.

• Surrendering the Policy: If you decide to end your policy, you may receive the cash value minus surrender charges.
• Taking a Loan: You can borrow against the cash value, but this accrues interest.

Should I Get Term or Whole of Life Insurance?

Choosing between term life insurance and whole of life insurance depends on your needs:

• Term Life Insurance: Lower monthly premiums and good for temporary needs, like covering a mortgage or income replacement for dependents.
• Whole of Life Insurance: A guaranteed payout and ideal for lifelong financial commitments, like inheritance planning or ensuring funeral costs are covered.

How Can I Get Whole of Life Insurance Quotes?

To find the best whole life insurance rates, it’s essential to compare quotes from multiple providers. Ascot Mortgages can do this on your behalf, analysing:

• Coverage amount
• Premium flexibility
• Cash value growth options
• Trust options
• Medical underwriting
• Additional features, like critical illness coverage.

Speak with Ascot Mortgages today to tailor a policy to your specific needs.