Whole of Life Insurance Explained

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Few of us can predict with absolute accuracy how long we’re likely to be around to pay the bills (among other, much more fulfilling activities of course!), and in this article, we’ll explain why whole life insurance coverage is one answer to this age-old problem.

We’ll then take a deep-dive into the topic of whole of life insurance: UK specific factors, where to go for the best deals, how it compares with alternatives such as term life insurance, and the pros and cons of taking out whole of life cover.

The guide will cover:


To talk to an advisor about whole of life insurance, call 0808 189 0463 or make an enquiry for a free, no-obligation chat.

What is whole of life insurance?

The definition of whole of life insurance is a life policy that remains in place and provides your nominated relatives with a benefit in the event of your death, no matter how long you live – provided all premiums are paid as set out in the schedule. Additionally, it has a savings element with a cash value that may accumulate over your lifetime.

A whole life insurance policy comes with an in-built guarantee that your nominated family members will receive the agreed payout no matter how long you live. The obvious advantage of whole life cover is that it gets around the issue of not knowing how long you’ll actually live when you take out the policy. But as we’ll explain, there are additional benefits to you during your lifetime as well.

How does whole of life insurance work?

As with life insurance, you pay an agreed premium in exchange for a payout to your family upon death, known as a ‘death benefit’. With whole life insurance, you’ll either need to keep up the payments (monthly or annually) as long as you live, for an agreed period only, or occasionally as a one-off sum. This will vary between policies.

Most whole of life insurance policies also have an investment element and accrue a “cash value”, which is taken from part of your premium. This acts as a form of equity, and you can cash in some of its value tax-free as the fund grows. The death benefit won’t be affected by withdrawals because it’s intended to be a separate benefit for you to use. 

Some policies called ‘universal life policies’ allow you to apportion some of the cash value to your beneficiaries in addition to the death benefit.

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Why get whole of life insurance?

Whole of life insurance is usually more expensive than term life insurance, so what might make it worth having? The main reasons are outlined below:

  • A whole of life insurance policy offers you peace of mind because it guarantees your relatives will be protected financially after your death, no matter when it occurs. 
  • The payout can be exempt from the usual 40% inheritance tax (IHT) if you write it into a trust. They may receive more than they would with term life cover because of the investment element of whole life cover. Speak to an advisor for more information. 
  • Its cash value can be a source of tax-free funds during your lifetime.

What does whole life insurance offer?

A whole of life insurance policy therefore offers peace of mind for you and for your relatives because it guarantees they’ll be protected financially after your death, no matter when it occurs. The amount they receive can be tax free, and they may receive more than they would with term life cover because of the investment element of whole life cover, although not necessarily on a like-for-like premium. 

Whole life term insurance also offers the possibility of a source of tax free funds during your lifetime, which is a major selling-point for many.

What does whole life insurance cover?

Like a term life policy, whole life insurance pays out a death benefit that can be used by its beneficiaries for any purpose they choose. These could typically be funeral costs, debts, inheritance tax liability, mortgage payments or anything else covered by loss of an income if you die before retirement age. 

The exact details of what is covered will depend on the insurer and on the type of policy you choose. For example, some policies may not cover certain causes of death such as drug abuse. 

Questions to ask

The best way to ensure you find the right whole of life insurance cover for you is to work with an experienced broker who will know in detail about the type of issues that customers tend to encounter, the potential pitfalls and what features are available. 

However, there are a few general points to be aware of that will help you to ask the right questions when researching your options. For example:

  • Will you need to make regular payments for life?
  • Will your premiums stay level, and for how long if so? 
  • Can you flex your cover, e.g. reduce it if your financial commitments get smaller (due to paying off your mortgage for example)?
  • What happens to your premium when the policy is reviewed?
  • What are the charges or penalties for cancelling your policy?
  • How will you be protected if you are no longer able to pay the premium?
  • What are the exclusions that might prevent a payout (i.e. certain causes of death)?

Do I need whole of life cover?

The primary purpose of whole of life insurance is to provide for any family members who currently rely on your income, so if you don’t have any dependents, this is an expense you don’t have to worry about. And even for those who do have beneficiaries, a term life insurance policy may provide what you need instead.

For example, if you’ve met most of your financial commitments, you have adult children who have assets of their own and/or if you’re already at an age where you don’t expect to outlive a term life insurance policy, more standard life cover should be perfectly sufficient.


Can I take out a joint whole of life insurance policy?

Yes, it is usually possible to take out joint whole life cover. This is generally cheaper than two individual policies, but will usually only pay out once, after the first-named person on the policy dies, although there are joint life second death policies.

Is a payout tax-free?

Life insurance payouts are usually subject to 40% inheritance tax (they are added to the estate and if all of that combined exceeds the IHT threshold then 40% tax is payable). However, you can get around this by writing your policy into a trust. This could make a substantial difference to any dependants, so we recommend you speak to an advisor if you want to ensure this happens.

Can I get whole of life insurance if I’m over 50?

Yes, it should certainly be possible to get whole of life cover if you are aged 50 or more. Premiums generally rise as you get older, but you should still be able to get a good deal. Speak to an independent expert or broker to ensure the best premiums.

Can you get whole of life health insurance plans?

Certain whole life policies include critical illness cover in the event of developing certain health conditions during your lifetime. Speak to an expert financial advisor to find a suitable product if this is an option you wish to explore. 

What is a whole of life insurance loan?

Whole of life insurance loans are one way of unlocking funds from the savings element (cash value) of your policy. Interest is charged on the loan by the insurer, and you pay it back over an agreed term. However, unlike cash withdrawals which do not affect the death benefit, any loans left outstanding when you die will reduce the value of the death benefit. 

Can I apply online?

In some cases it will be possible to apply for a whole of life insurance policy online, however, we would not recommend making such a significant financial commitment without professional assistance. By working with an independent expert you can compare products from across the market, not just those offered by a single insurer. 

What if I no longer want whole of life insurance cover?

If you decide to surrender your policy at any time after taking out an all of life insurance policy, all policies allow you to exchange its fund value for cash, less any exit charges or penalties levied by the insurer. However, some do not permit this, and charges will vary between insurers, so it’s important to check this detail when you enter any life policy.

How much whole of life cover do you need?

Life insurance of any type needs to cover any significant debts (mortgage, loans, credit cards etc) as well as any regular income you use to support your partner and/or children. You may also want to take into account future expenses such as university fees.

There are plenty of life insurance calculators available online, but we recommend that you work with an advisor to ensure you arrive at the correct figure.

When should I buy whole of life insurance?

All life insurance is cheaper the younger and healthier you are, and whole life insurance is especially worth purchasing as soon as you can because it usually has a savings element that can grow over time. This can be used for major purchases such as property deposits if you play your cards right.

Is whole life insurance available for diabetics?

Yes, you should be able to qualify as a diabetic, but your premiums are likely to be elevated. Fortunately, specialist independent financial broker could find you a great deal. They have experience working with diabetic clients to ensure you get the best premium in your circumstances. 

If you’re diagnosed with diabetes after taking out life insurance of any type, the good news is you should be able to keep the premiums you originally signed up to.

Speak to an expert

If you need further whole life insurance information, or are looking to apply in the near future and want to put your whole life insurance questions to an expert, the experienced brokers we work with are ideally placed to help you find the ideal product offering lifelong protection for you and your family. 

Simply call us on 0808 189 0463 or fill out our quick enquiry form and we’ll be in touch soon to match you with the right advisor for you.

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