Whole life insurance - sometimes also known as ‘life assurance’ helps protect the people you love after death.

There are many things in life that, sadly,  we can’t control - death being the most notable. Nevertheless, that shouldn’t stop you from planning for the best as well as the worst. If you didn’t know already, whole insurance is a great way to provide financial protection for your loved ones in the event of your death.

In theory, buying life insurance should be a simple process - although this isn’t always the case. However, we’ve put together this handy guide to help explain the ins and outs of whole life insurance. We’ll aim to help answer any queries you may have about how whole life policies work and how you can save money on cover.

In this article, we’ll look at:

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What is whole life insurance?

Sometimes referred to as life assurance, whole life insurance is a type of life cover that protects your loved ones if you die - whenever that may be. Once this happens, your insurer pays out a cash lump sum to your loved ones, providing financial security during this difficult time.

One of the main benefits of whole life cover is that you are protected for the rest of your life, so long as you keep paying monthly premiums. Compared to other types of life insurance, whole life policies are generally more expensive as you're paying for long-term cover. Nonetheless, it's a great way to give your family peace of mind for the future ahead.

How it works:

When you take out a whole life plan, you start paying monthly or annual premiums to your insurance provider. These payments last until your death, at which the policy ends. 

Most standard whole life policies provide fixed premiums (if you opt for ‘guaranteed’ premiums) and a fixed payout amount. Even as you get older or develop any health conditions - you’ll still pay the same for cover. 

Are there different types of whole life insurance?

Yes, whole of life policies are offered in two different ways:

Standard whole life cover

Standard whole of life insurance is the version that Cavendish Online offers. This product has no investment value, you simply pick how much you would like to be assured for and pay your monthly premiums. This is the simplest form of whole life cover. Your premiums can be guaranteed or reviewable, so discuss your preference with an adviser first. 

To talk to a Cavendish Online adviser about whole of life cover, please call us on:

01392 436193


Unit-Linked whole life cover

This is an investment based product where part of your premium goes towards insuring your life, and part is invested. Unfortunately, Cavendish Online is not authorised to discuss this product with you.

Why do I need whole life insurance?

Unfortunately, no matter how healthy you are, nothing can 100% protect you from death. Depending on your age, you may not see the need for buying life insurance. Regardless, if you have dependents, you should never rule out buying cover.

Besides giving your family peace of mind, whole life insurance can provide financial security for years to come. Naturally, if you are the main source of income for your household, it makes sense to buy life cover. The last thing anyone wants is for their family to struggle to make ends meet when they die.

The pay-out from a life insurance policy can help your family with future costs, such as:

If you and your spouse share financial responsibility, it may make more sense to get a joint life insurance cover. A joint policy provides cover for both spouses under a single plan. This type of cover typically pays out after the death of one of the policyholders (if it is a joint life, first death policy), after this the policy ends and if the surviving person wants cover they will need to apply for a new policy accordingly.

How much does a whole life policy cost?

As one of the more expensive types of cover, several factors can increase the cost of your policy. Before you can take out cover, you usually need to apply for a quote - this is used to calculate an estimated cost of your policy.

When applying for a quote (whether online or in-person) your insurer will ask you some general questions. Most insurers usually require information regarding:

Age and health are two of the major factors for determining the cost of a policy. As you get older, the starting cost of life insurance premiums rises due to the increased risk of a claim occurring. Having any medical conditions can also increase the cost of your cover.

Whole life insurance doesn’t have to be expensive for everyone though! Here are a few ways you can reduce the cost of your cover:

1. Buy cover at an early stage - as whole life insurance offers fixed premiums, locking in a cheap premium rate can save you money in the long haul.

2. Opt for a joint life policy - if you and your partner share an income, it makes sense to share cover rather than buying individual policies. Joint life policies can be easier to manage than separate policies, and they may also work out cheaper.

3. Don’t smoke - along with age and health, smoking can cause a higher initial premium for life insurance. Some companies may reduce your premiums once you’ve stayed smoke-free for 12 months (usually subject to a cotinine test). So if you’re a smoker, giving up can help you save on cover!

Unsure of your options?

Is whole life insurance tax-free?

Technically speaking, whole life insurance is considered tax-free, though you need to be aware that this isn’t always the case. 

When you die, anything of value is classed as part of your estate - including any pay-outs from life insurance policies. Should the value of your estate exceed the threshold for inheritance tax (£325,000 as of 2022); anything above the threshold may be subject to inheritance tax.

To ensure the pay-out from a life insurance policy is protected from inheritance tax, some people consider writing the policy in trust. That way, the policy belongs to the trust and typically isn’t considered part of your estate.

Can I cash in my whole life insurance policy?

In some cases, it is possible to cash in a whole life insurance policy if you no longer require cover or can no longer afford your monthly premiums - this is subject to the type of whole of life policy you took out. Despite this, there is usually a hefty penalty fee attached when cancelling your cover; known as the ‘surrender value’. 

This means that the value of the policy could end up being much less than previously - especially if you’ve only had the policy for a few years. In this case, cancelling your policy should be viewed as a last resort.

What happens if I can't pay my premiums?

If you are unable to pay your premiums, there are usually a few options available.

For example, if you are struggling to pay your premiums because you’re currently off work ill, and your plan includes waiver of premium, your insurer will cover your premiums for you and you won’t lose the cover.

Alternatively, they may be able to grant you some sort of payment holiday or repayment plan.  

It’s important to speak to your insurer before making any decisions about your policy. They will be able to provide more information and advice on what options are available.

Products & Services from the leading financial brands

  • Zurich
  • Legal And General
  • Aviva
  • AIG
  • Beagle Street
  • LVE
  • Royal London
  • Vitality Life
  • Virgin Money
  • Budget Insurance
  • Scottish Widows

Alternatives to whole life cover

If you’re looking for cheaper cover or perhaps you just want to protect your family in the short term, there are a range of alternatives to whole life insurance. The most notable is term life insurance.

Term life insurance

Unlike whole life policies, term life insurance has an expiry date (i.e. it only lasts for a set period of time). This is known as the policy term. Your insurer will only pay out a lump sum if you die within this time. If you survive, the policy expires and you will not receive any compensation for the premiums paid up until this point.

Term life insurance has 3 levels of cover:

  • Balanced term - regarded as the standard type of term life cover. Both your premium costs and pay-out value are fixed throughout the policy term.

  • Decreasing term - (also known as mortgage life insurance) is typically used to protect large payments - like a repayment mortgage. Your family may struggle to pay these costs in your absence, therefore this type of cover can ensure they are covered.

  • Increasing term - designed to protect the pay-out amount from inflation. The pay-out increases over time so that it retains its value when you die. However, your premiums may be increased as a result.

While term life insurance doesn’t cover you indefinitely, it is typically cheaper than whole life insurance. So if you’re looking to save money on cover and are only looking to be covered for a specific period of time; a term policy may be an ideal option for your consideration.

Critical illness insurance

Critical illness cover can provide you and your loved ones with financial support if you are diagnosed with a defined illness of specified severity. In the event of a valid claim, your insurer can pay-out a lump sum to you directly. This money can help in many ways, for instance to cover any income loss from being unable to work, make adjustments needed to your home or get support with day to day living. 

It’s important to be aware that not all types of illnesses are covered, and that insurers can differ on their definition of illnesses included in their policy.

As always, we strongly suggest you take time to read through the terms and conditions of your policy to understand what you are covered for - if you have any questions it is worth getting in touch with your chosen insurer who should be happy to help. 

Critical illness cover can be purchased either as a stand-alone policy, or on a life or earlier critical illness basis. To speak to someone about how Cavendish Online can help you secure the best critical illness policy for your needs please call us now on:

01392 436 193


Talk to a Critical Illness expert today...

Income protection insurance

Income protection (sometimes also known as permanent health insurance) is designed to provide you with a monthly, tax free benefit in the event of you becoming incapacitated and unable to work due to illness or injury.

This type of policy is there to support you financially in such an event, until your policy term/pay-out term ends, or when you return to work or die – whichever is earliest.

Why choose Cavendish Online?

When it comes to buying whole life insurance, you need an insurance provider with your best interests at heart. At Cavendish Online, we understand the importance of protecting your loved ones, that’s why we aim to provide the best advice when it comes to buying cover.

We’re not just like any other life insurance provider. We pride ourselves on helping our customers find the best policy to suit their needs at an affordable price. Our team is on hand to provide expert advice, ensuring you find the ideal policy for you and your family. Speak to an advisor today to begin your journey to buying life insurance cover!

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