Whole-of-life cover
Whole-of-life cover is a life insurance policy that pays a guaranteed lump sum whenever the policyholder dies — there is no fixed term and no expiry date. Because a claim is certain to be paid eventually, premiums are significantly higher than for term life insurance. It is commonly used for inheritance tax planning, to leave a guaranteed legacy, or to cover funeral costs.
Common uses of whole-of-life cover
Inheritance tax planning
A whole-of-life policy written in trust can pay the IHT liability on death without the proceeds forming part of the taxable estate. This prevents beneficiaries having to sell assets to fund the tax bill.
Guaranteed legacy
For those who want to leave a specific sum to children, grandchildren, or a charity regardless of when they die, whole-of-life provides certainty that term cover cannot offer.
Funeral costs cover
Smaller whole-of-life policies (£5,000–£30,000) are sold specifically to cover funeral and final expenses. These are sometimes called over-50s plans and typically require no medical underwriting.
Business protection
Shareholder protection and key person cover sometimes use whole-of-life where the obligation to pay a partner's estate has no expiry — though term cover is more common for most business uses.
Whole-of-life vs term life
Term life cover is cheaper because the insurer only pays if you die within the policy term — many policyholders outlive their policy and no claim is made. With whole-of-life, a payout is guaranteed, so premiums are much higher for the same sum assured. For most people with mortgage and family protection needs, term cover is more cost-effective. Whole-of-life is best suited to specific estate planning or legacy objectives.
Review the investment or savings element of unit-linked whole-of-life policies carefully — the sum assured may reduce if the investment fund underperforms. See also term life cover and beneficiary for related terms.