Whole of Life Insurance

Protecting your loved ones, whatever happens...

Drewberry™ provide pensions, investment and insurance advice for Money to the Masses readers throughout the UK.

 

What is Whole of Life Insurance?

 

Whole of Life Insurance provides your loved ones with a lump sum payment when you dies so long as you have maintained your premiums.

 

It is often used to cover an inheritance tax liability, funeral costs or to pay off outstanding loans.

 

Opting for cover with guaranteed premiums means you can lock in the cost of the policy from the outset

 

99.99% of all whole of life insurance claims were paid out in 2017 – Association of British Insurers

 

Speak to our expert independent advisers or get an instant online quote to compare the UK’s leading insurers.

What is it?
 

Do I Need Whole of Life Cover?

Term Insurance is usually more suitable for covering large debts with a set term, such as a mortgage.

Whole of Life Insurance policies are used for other purposes where a payout on death is required regardless of when it happens, such as:

  • Covering funeral costs – an inevitable cost which most would rather cover than leave a bill for their loved ones during such a difficult time.
  • Estate and inheritance tax planning – with the price of UK property many families now have sizeable potential IHT liabilities which are best covered to avoid a heft bill.
Do I Need it?
 

Term Insurance vs Whole of Life Insurance

  • Term insurance ends after a set term, e.g. 25 years. As the name suggests, Whole Life Insurance covers you until you die (providing you keep paying the premiums and stick to the policy terms).
  • As payouts are guaranteed with Whole of Life Assurance, it tends to be more expensive than Term Insurance.
  • You have a number of options for term insurance payouts, such as decreasing coverlevel cover or Family Income Benefit.
  • For Whole of Life cover, the most common option sees the payout remain fixed for the policy’s life, although indexed increasing policies are available.
  • Both types of life insurance have the option of guaranteed premiums to ensure the cost of your plan is fixed for its duration.
Term vs Whole of Life
 

Taxation of Whole of Life Cover

Without proper estate planning, the payout from any Life Insurance policy becomes part of your estate when you die.

HMRC usually charges inheritance tax at 40% on the proportion of an estate that rises above a set threshold. This will include your Life Insurance payout, potentially reducing it to less than the figure you initially required.

Writing Whole of Life Cover into Trust

To avoid an inheritance tax charge on the payout, it’s recommended you write a Whole of Life Assurance policy into a trust for your loved ones, so it never becomes part of your estate and subject to taxation.

Paying Whole of Life Cover into trust can also leave your family with ready cash to pay any inheritance tax liability your estate might attract after your death.

How is it Taxed?
 

How Much Does Whole of Life Insurance Cost?

  • Whole of Life Assurance tends to be more expensive than Term Insurance because the payout is guaranteed.
  • As with other types of insurance, Whole of Life cover costs more to buy the older you are when you take out the policy.
  • For over-50s cover, a subset of Whole of Life Insurance, many companies offer guaranteed acceptance under a certain age, such as 80, without the need for a medical.
  • Guaranteed over-50s plans don’t tend to be linked to the policyholder’s health as Term Insurance tends which can make them more expensive as there is more unknown risk for the insurer.
  • ‘Over-50’s’ plans tend to have lower maximum benefits, and most require insureds to survive for a minimum period before they pay out.
What Does it Cost?
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This Guide…

Andrew Jenkinson - Drewberry
Written by:
Michael Englefield
Content Manager at Drewberry
⏰  7 min read
 

What is Whole of Life Insurance?

Whole of Life Insurance is a form of Life Insurance with a guaranteed payout after your death, whenever that might be, providing you continue paying the premiums and don’t otherwise breach the terms of the policy.

Whole of life is also known as Permanent Life Insurance, because you pay premiums for the rest of your life and in exchange are covered right up until your death.

This is compared to Term Insurance, which is Life Insurance that ends after a set term agreed between the insurer and the insured. Term Insurance, particularly Decreasing Term Insurance, is therefore often used to cover a debt with a fixed term, such as a repayment mortgage.

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Should I Get Whole of Life Insurance?

Whether or not you need Whole of Life Assurance depends on your personal circumstances.

If you want a guaranteed lump sum to leave your loved ones after your death, or meet other obligations, then Whole of Life cover might be right for you.

 

Whole of Life Insurance or Term Insurance?

When comparing Term Insurance and Whole of Life Insurance, you’ll find that Whole of Life Assurance policies are generally more expensive than Term Insurance policies because the benefit is guaranteed.

Whole of Life Assurance policy the risk insured is ‘assured’ (i.e. will definitely) happen, with the risk being the policyholder’s eventual death.

The ABI revealed the average Whole of Life policy claim in 2017 totalled £4,511.16, compared to £78,323.35 for Term Life Insurance policies.

Which is best for me?
Each type of life cover is typically designed to protect very different liabilities.

  • If you have a liability which is being paid off over time or has a finite shelf life such as a mortgage, car loan etc., then Term Life Insurance is probably a better option.
  • If there is a liability which will arise on death regardless of the timeframe such as funeral costs or an inheritance tax bill, Whole Life Insurance is usually the more suitable option.
 

Funeral Insurance and Covering Small Debts

One of the most common uses for Whole of Life Cover is to provide Funeral Insurance. This ensures a small lump sum is paid out on your death to cover funeral expenses so your loved ones don’t have to worry about taking care of the cost or deducting it from their inheritance.

Over-50s Life Insurance plans are typically Whole of Life Cover used for funeral expenses, although some people may also use such policies to provide a minimal legacy to family or cover small debts.

Whole of Life Cover is often used as a funeral insurance plan

It’s worth considering that your estate is usually required to cover any debts held solely in your name after you die, providing there’s enough money contained in it to do so. (Note that the rules are different for debts/mortgages in joint names.)

Assuming you’ve left a solvent estate, debts are usually paid first and your beneficiaries only get the value of your estate net of any debt payments.

Some people use a Whole of Life Insurance policy to cover these small debts, although it’s worth noting that, over time, the premiums of such policies can rise to be worth more than the eventual benefit. This means that it may be more prudent to use the money you would have paid on premiums to pay down the debts depending on your circumstances.

Some Whole of Life policies, particularly over-50s plans, have a minimum survival period clause where they will not pay out if you pass away within approximately the first 2 years of the policy.

 

Inheritance Tax Insurance

When an individual dies, inheritance tax is due on the value of their estate above a set threshold. It takes a 40% bite out of anything you want to pass down the generations above this limit.

Many families are facing an inheritance tax bill thanks to rising house prices, so it’s becoming increasingly common to use Whole of Life Assurance to cover these bills.

couple in retirement considering whole of life insurance

Where the estate has sufficient liquid funds to cover the inheritance tax bill, HMRC will usually grant the estate’s executor(s) access to settle the bill with a bank transfer from the deceased’s account(s).

However, these days most estates don’t have sufficient liquid funds available, commonly because a house makes up the bulk of the estate.

In such circumstances, executors and/or beneficiaries may have to pay out of their own pocket and attempt to recoup the money from the estate afterwards. Bank loans are also commonly available for beneficiaries in this situation.

neil adams, pensions and investments expert at drewberry

Getting Whole of Life Cover to use as inheritance tax insurance firstly involves calculating how much inheritance tax you might have to pay. This can be done using our free Inheritance Tax Calculator. Once you have a figure, you can set about comparing Whole of Life Insurance quotes.

Neil Adams
Pensions & Investments Expert at Drewberry

When you use Whole of Life Insurance to cover an inheritance tax bill, it’s essential you write it into trust so it falls outside your estate when you pass away.

Writing Whole of Life Insurance Cover into trust will ensure that not only will the payout be tax-free, but it can also provide your beneficiaries with a lump sum that’s outside your estate and therefore not tied up in probate.

This money can be used to pay the taxman so your estate can be released to the beneficiaries. That way, they can inherit what you always meant them to have.

 

Gifts Inter Vivos Insurance

Gifts you give away while you’re alive are known as gifts inter vivos, but if you die within 7 years – and potentially up to 14 years – of giving those gifts, inheritance tax is typically due on such gifts.

Whereas inheritance tax usually has to be paid out of the value of the estate, inheritance tax on gifts inter vivos must be paid by the recipient of your gift.

That means your gift could land someone with an inheritance tax bill several years after you’ve made it, when the money may already be gone.

The amount they would have to pay tapers down depending on how long you live after making the gift, so a set of decreasing term Life Insurance policies – known as Gifts Inter Vivos Insurance – could cover the potential inheritance tax liability on gifts you’ve made.

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Very helpful and professional advice. Would recommend using Drewberry if you are looking for help with Relevant Life Insurance.

Paul Henderson
14/12/2018
how much does whole of life insurance cost

How Much Does Whole of Life Insurance Cost?

The cost of Whole of Life Insurance is typically more expensive than Term Insurance because there’s no term limit.

The risk to the insurer is assured, because as long as you keep paying the premiums and don’t otherwise violate the terms of the policy, there’ll be a definite payout at the end of the policy (i.e. when you pass away).

As such, premiums are generally costlier which leads people to often insure lower amounts with Whole of Life Cover, often just to protect against funeral costs and to cover small debts.

However, where the policy is being used to cover an inheritance tax liability, the sum assured could be worth tens or even hundreds of thousands of pounds. It is usually this sum assured that will impact on the cost of Whole of Life Cover the most.

 

Beware Reviewable Permanent Life Insurance Premiums!

In the past, many Whole of Life Insurance policies were sold with reviewable premiums. This means the insurer is entitled to increase premiums to cover their increased costs over the life of your policy.

The cost of Whole of Life Insurance can jump significantly over time if you have reviewable premiums. If guaranteed premiums are available to you, we’d typically recommend choosing them over reviewable premiums to prevent your premiums becoming unaffordable and leaving you unable to maintain the level of protection you need.

Factors the insurer may use to increase reviewable premiums include:

  • Inflation
  • Investment performance
  • Reinsurer fees
  • The level of future claims the insurer expects to pay
  • The insurer’s own expenses and taxes
  • The insurer’s need to hold a capital buffer/financial reserves.

These can all result in significantly increased premiums over the life of the policy at each policy anniversary date through no fault of your own.

mark williams, pensions and investments expert at drewberry

Guaranteed Permanent Life Insurance premiums stay fixed over time, although will naturally rise if you want to increase the benefit or you’ve chosen to index-link the payout so it maintains pace with inflation. However, the inflationary increase will be set out clearly, so you’ll know exactly by how much your premiums will rise each year.

Mark Williams
Pensions & Investments Expert at Drewberry

Do I need a medical for whole of life cover?

Will I Need a Medical for Whole of Life Insurance?

This depends on a number of factors, although a medical is more likely to be a requirement the more you’re looking to insure. If you do require a medical, poor health may increase the cost of insurance.

However, broadly speaking there’s often no medical for Whole of Life Insurance, especially when you’re looking to insure relatively small amounts.

Many providers, particularly those offering guaranteed over-50s plans, won’t even require you to take a telephone health questionnaire to get Whole of Life Cover.

Essentially, that’s because providers realise that they are insuring against an event that will definitely happen in the future, regardless of how healthy or unhealthy you are. As such, premiums tend to be higher across the board to take account of the more lenient medical requirements to obtain cover.

Age Limit on Whole Life Insurance

The maximum age for Whole of Life Insurance varies depending on insurer. The age limits on Whole of Life cover are generally higher than for Term Insurance, with it being possible to find cover in your 70s and even 80s.

This is why the policies are so attractive for older individuals looking to use Life Assurance as part of their estate planning.

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Best whole life insurance cover

Compare Best UK Whole of Life Insurance Providers

aegon

Aegon

Providing you meet Aegon’s eligibility criteria, you’ll automatically be offered £1 million of free Whole of Life Cover for up to 90 days while your policy is processed.

  • Minimum entry age: 18
  • Maximum entry age: 84
  • Maximum sum assured: Unlimited
aig

AIG

AIG’s Whole of Life Insurance includes access to the company’s Best Doctors service, a second medical opinion service to help you get the right treatment and care.

  • Minimum entry age: 17
  • Maximum entry age: 84
  • Maximum sum assured: £25 million (with consideration for sums above this amount on a case-by-case basis)
canada life

Canada Life

Increase your Canada Life Whole of Life Insurance benefit by up to £250,000 if the value of your estate increases or the UK government makes changes to the UK inheritance tax legislation that means you may face an increased bill.

  • Minimum entry age: 18
  • Maximum entry age: 74
  • Maximum sum assured: Unlimited (depending on underwriting factors)
royal london

Royal London

Providing you’re under the age of 70, you can increase your cover by the lower of £200,000 or half the sum assured if you face an inheritance tax increase due to a larger estate or changes in government legislation.

  • Minimum entry age: 18
  • Maximum entry age: 89
  • Maximum sum assured: Unlimited
scottish widows

Scottish Widows

Scottish Widows’ Whole of Life Insurance doesn’t include a terminal illness benefit.

However, Scottish Widows does have one of the largest permitted increases in cover if you see your inheritance tax liability rise – you can increase it by the lower of £500,000, 50% of the sum assured or the increase in potential inheritance tax liability on the estate.

  • Minimum entry age: 18
  • Maximum entry age: 83
  • Maximum sum assured: £25 million for level cover and £15 million for increasing cover (maximum increasing cover limit is £30 million)
vitality

Vitality

Vitality’s Whole of Life Insurance comes with the same unique features as other VitalityLife products, including the ability to add options to your plan that could see reduced premiums as a result of healthy living or allow you to build up points towards various lifestyle rewards, such as fitness trackers or free cinema tickets.

  • Minimum entry age: 16
  • Maximum entry age: 74
  • Maximum sum assured: £20 million
zurich

Zurich

Zurich’s Whole of Life Cover includes a terminal illness benefit as standard, although if you want to include waiver of premium this is an optional extra, unlike some other Whole of Life providers where its included as standard.

  • Minimum entry age: 16
  • Maximum entry age: 83
  • Maximum sum assured: Unlimited

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whole of life insurance calculator

Whole of Life Insurance Calculator

Use our Whole of Life Insurance Quote tool below to calculate Whole Life Cover premiums for your specific needs and circumstances.

As mentioned, this will largely depend on the sum you’re looking to insure, so you must first work out how much Whole of Life Insurance you need to buy.

If you’re using it to cover funeral costs or small non-mortgage debts, this should be fairly easy. Simply get a quote from a funeral director for your funeral expenses or calculate the amount of debt you have and set your Whole of Life Insurance policy to match this.

 

Inheritance Tax Insurance Calculator

Calculating Permanent Life Insurance to cover an inheritance tax liability is tricker, because you have to try and estimate how much your estate will be worth when you die and therefore how much inheritance tax might be due.

A good first step is to use Drewberry’s free Inheritance Tax Calculator to add up all of your assets and calculate your potential inheritance tax liability. Once you’ve worked that out, you’re in a better position to understand the sum you may want to insure to protect your loved ones on your death.

peter banks, wealth and investments expert at drewberry

Your inheritance tax liability could rise, for instance as house prices increase or you yourself inherit assets. For this reason, most Whole of Life Insurance providers allow you to increase your cover if the value of your estate rises or your liability grows thanks to changes in government legislation.

Peter Banks
Wealth & Investments Expert at Drewberry

 

Gifts Inter Vivos Insurance

A Gifts Inter Vivos Insurance policy isn’t Whole of Life Insurance. Rather it’s a set of term policies to cover the decreasing inheritance tax liability the majority of gifts you make while you’re alive to individuals face over a 7 year period.

When you make a gift to an individual, assuming you’ve made no other lifetime gifts or transfers previously, the gift only falls outside your estate if you live for 7 years after making it. During that 7 year period, inheritance tax may be due on a sliding scale on the gift should you pass away during this time.

The below table provides the rate of inheritance tax due on potentially exempt transfers (PETs) you make during your lifetime over a 7 year period.

This covers most gifts to individuals and gifts into certain trusts (although the majority of gifts into trusts will be chargeable lifetime transfers [CLTs] and therefore have different rules).

Years Between Gift and Death

Inheritance Tax Due on Gift (%)

Less than 3 years

40%

3-4 years

32%

4-5 years

24%

5-6 years

16%

6-7y ears

8%

7+ years

0%

neil adams, pensions and investments expert at drewberry

Setting up a series of interlinked policies over a 7 year period can be complicated, as can working out any potential inheritance tax liability on the gifts in the first place. For this reason, we highly recommend speaking to an expert on the subject – the team at Drewberry is available on 02084327333.

Neil Adams
Pensions & Investments Expert at Drewberry

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Expert Whole of Life Insurance Advice

As independent Life Insurance advisers, we’re on hand to answer any questions and provide guidance to ensure you can make an informed decision when considering Life Insurance.

If you’re looking for Whole of Life cover as part of estate and inheritance tax planning, the expertise of our advisers could be invaluable in helping you and your beneficiaries mitigate any potential liability.

tom conner, director at drewberryh

We’d always recommend getting advice when buying cover, as it can help you get the best policy for you. We’re just on the other end of the phone, so please don’t hesitate to contact us on 02084327333.

Tom Conner
Director at Drewberry

Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
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Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

Frequently Asked Life Insurance Questions

 
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