As with many insurance products, there are lots of terms that risk sounding like jargon. So at Cavendish Online, we’ve put together a brief guide to explain what whole-of-life insurance is, to help you make a more informed decision on whether it’s right for you.

In essence, the two types of life insurance policies you’re most likely to come across are ‘term insurance’ and ‘whole-of-life’.

What exactly is whole life insurance?

A whole of life insurance policy (often called life assurance) is a life insurance policy that has no end date. You are covered under the policy until you pass away, whenever that might be. 

Of course, you will need to keep up your monthly premiums to guarantee your payout, and failure to do so will likely result in the policy being cancelled and you losing your cover.

Typically, because the policy ensures a guaranteed payout, the premiums are more expensive than term life insurance policies, which have an end date, and can therefore be survived.

Due to the nature of the policy, it is sometimes possible to pay more in premiums over the life of the plan than the sum assured. Please speak to an adviser before purchasing to ensure that you have exactly what you want in place. 

Learn more about term life insurance.

The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. 

If you are facing financial difficulty, please contact your insurer before cancelling your policy or letting it lapse. They may have options available that means you don't have to lose the plan.

Is whole life insurance suitable for me?

Like most things, there is no one right answer for everyone, and the decision will come down to your personal circumstances and preference. Because of the guaranteed payout, whole life insurance policies can be beneficial in a number of different ways.

Here are a variety of reasons for why you may want to consider taking out whole life insurance:

An inheritance tax liability

Whole of life cover is a good option if there is going to be an inheritance tax liability (IHT) on your estate after you die. The current IHT threshold is £325,000 (for the tax year 2022/2023). Inheritance tax is charged at 40% on the value over the threshold, and may mean that your estate is tied up in probate before being released to your loved ones. 

Since your loved ones will need to pay this tax bill before gaining access to your estate, a whole life policy can help ensure they have enough to cover the bill and free up your estate. 

To ensure that your insurance payout does go straight to your loved ones and not into your estate, the policy should be written in trust. Learn more about writing your policy in trust.

Whole life insurance isn’t the only option available for inheritance tax purposes. You may also want to take a look at Gift Inter Vivos.

Please note that Cavendish Online is unable to provide advice on tax, and if advice is required, please seek a specialist.

You’d like to leave funds for a funeral

We’ll all have to have some sort of funeral eventually, and according to Legal & General, the average cost for a funeral in 2022 was £4,216 (source). This could be quite a hefty sum for your already grieving loved ones to find, so a whole life insurance policy could come in handy.

Your loved ones could use part, or all of a payout to cover the funeral, making the process much smoother. 

You have debts or liabilities

Whilst you may want to cover more typical debt, like a mortgage with mortgage cover or a repayment loan with term life insurance, there are some debts that follow you after you pass away. 

An example of this would be an equity release mortgage. An equity release mortgage is usually repaid by the resale of your property, but if you don’t want this to happen, then you may want to set up a whole life policy to cover it instead.

You’d like to leave an inheritance

Because whole life cover comes with a guaranteed payout when you die, it may be a good option for you if you’d like to leave an inheritance for your loved ones. These funds could help with things like:

If any of the above are your main concerns, however, then term life insurance may still be something to consider, and you may want to compare the two. 

For further help, please see our article - Whole and term life insurance: Which is better?

You’d prefer a guaranteed payout

Another reason to consider a whole life plan is simply whether or not you would prefer a guaranteed payout. Guaranteed payouts are always more expensive than non-guaranteed payouts (found in term life insurance), but if it offers you more peace of mind, then it might be the best option for you.

How much does whole life insurance cost?

Like most life insurance policies, the cost will depend on your individual circumstances, and there will be a number of contributing factors, such as:

This process is called underwriting. Learn more about underwriting.

Generally, the younger and healthier you are, the cheaper your policy will be! So there’s no time like the present to start looking into quotes.

Can you get joint whole life cover?

Whole life cover is available as a single policy (covering one person) or a joint life policy (covering two people).

The most common joint whole life policy is referred to as ‘joint life, second death.’ Joint life, second death, as the name implies, would pay out upon the second person dying and there is no payout for the first person that passes away. 

Should you require it, ‘joint whole life, first death’ policies are also available through select insurers.

Is whole life insurance tax free?

Since whole life insurance is often purchased to cover an inheritance tax liability, you would hope the payout is tax free, but unfortunately, by default, it is not!

The actual payout could also be subject to inheritance tax if it falls into your estate and either takes your estate over the tax threshold (£325,000 for the tax year 2022/2023) or contributes to the amount already surpassing it. 

To ensure that the funds are readily available for your loved ones, and to help them remain exempt from inheritance tax, you should consider writing the policy in trust

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.

Can I cash in my whole life insurance policy early?

If you have purchased your whole life insurance policy via Cavendish Online, then there will be no cash-in value, as we do not offer investment products. 

If you have an investment product that you purchased elsewhere, it may be possible, but you should talk to your provider directly as we are not authorised to discuss them with you.

The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit.

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 canceling your policy. They will be able to provide more information and advice on what options are available. You should do this as soon as possible to avoid the policy defaulting.

Can you borrow against whole life insurance?

Yes, you can usually borrow against the cash value of a whole life insurance policy, but this will reduce the death benefit and may have tax implications if not repaid.

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

What happens if you stop paying whole life insurance premiums?

If you stop paying premiums for a whole life insurance policy, the policy might lapse. Insurers often offer a grace period, after which the policy may use the cash value to keep itself in force before it ultimately lapses.

Please note: If you are facing financial difficulties and can no longer afford your premiums, please contact your insurer as soon as possible to stop the plan from lapsing automatically. They may have a scheme that allows you to keep the cover.

Do whole life insurance premiums increase with age?

Premiums for whole life insurance are typically fixed and do not increase with age once the policy is in force. In most cases cover is likely to be cheaper when you are young as opposed to when you are older or suffer from pre-exisiting medical conditions.

During the application phase, however, you could opt to add indexation to the policy. This means that the sum assured increases with inflation over time, but please note that the premiums will too.

There may, however, be exceptions for investment linked policies, but please note that Cavendish Online is not authorised to discuss or sell these types of products.

Does whole life insurance expire?

No, whole life insurance does not expire as long as premiums are paid. It provides cover for the insured's entire lifetime.

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