Toggle navigation

Is Whole of Life Insurance more expensive than Term?

Whole of Life Insurance more expensive than Term?

22 Sep 2020

Life Insurance is a fantastic investment in the wellbeing of your family after you’re gone, but it can be pricey. There are definitely policies to fit every budget, but it’s important to explore your options to make sure you’re buying the right policy for your situation. 

Figuring out the monetary side of buying a life insurance policy doesn’t have to be tricky though. To put it simply, there are a few factors that influence the monthly premium cost in a big way. The biggest of these factors is whether you choose term or whole of life insurance.

Whole of life insurance gives you lifelong coverage with a guaranteed payout, so you know that no matter when you pass away your family will be protected. It’s the most well-known form of permanent life insurance too. 

Term life insurance covers you for a shorter period of time (you set the length of this term when you buy your policy) but is often considerably cheaper and simpler to navigate. 

Whole of life insurance is undeniably almost always more expensive than term life insurance, but let’s take a look at why this is the case. 

What is whole of life insurance? 

Whole of life insurance covers you from when the product is activated to the point of your death. It can also include an investment component (the policy’s “cash value”). The cash value grows in a tax-deferred account, and you can borrow money against this or surrender the policy for cash. Surrendering the policy for cash forfeits your coverage, however. 

Despite not being quite as simple as term life insurance, whole of life cover doesn’t have to be complicated. In many ways, whole of life is the most straightforward kind of life protection product out there. Here’s why: 

  • Once you’ve bought your policy, the premiums stay the same until you pass away and your loved ones receive the pay out. 
  • The death benefit is guaranteed - so you know you’re not investing money monthly only for your family to get nothing when you die. 

Whilst there’s a certain peace of mind that comes with knowing you’ll be covered for your whole life, no matter what happens, this is one of the reasons whole of life cover can be so much pricier than term insurance. 

What is term life insurance?

Term life insurance will cover you for a pre-agreed term. Simple, really! When buying your policy, you can set the term to finish at a point in your life that works for you. Many people choose to end their term after their children have left home, or after their mortgage has been paid off. Common terms are ten, twenty, or thirty year long policies. Of course, the longer the term you set, the more expensive the policy will be,  but it’s rare for a term policy to surpass a whole of life policy in price. 

Ideally, your need for a life insurance policy will end when your policy expires, in that your major financial commitments will be over. However, if you’ve found that you think you’ll need more time, many policies will allow you to extend the term (although often this means the premiums change). 

With some term policies, the premium you pay stays the same every month until the policy ends. Others get cheaper over time (as the risk of you passing away within the policy term gets smaller). 

If you choose to buy a term life insurance policy, make sure you choose a policy and term that cover the years your family would be most vulnerable without you, and buy an amount of cover that would replace your income. If you’re on a tighter budget this might not be an option, but going through an insurance broker and adviser like LifeSearch can help ensure you get the best cover for your situation. 

Cost comparison: Term life insurance vs Whole of life cover

Whole of life insurance is more expensive than term. Even some of the more pricey term policies are likely to fall short of the average whole of life policy, as term life insurance is temporary and less likely to be claimed.

Whole of life insurance premiums are usually much higher because you’re guaranteed a payout. You might not die during the term of a term life cover policy, but a whole of life cover policy doesn’t end until you pass away, so there’s a guaranteed return. 

If you’re not sure what sort of cover to go for, or you’re not sure whether there’s a policy to suit your budget, give us a call on 0800 316 725 today.

Here at LifeSearch, we want to see everyone protecting the lives they love, which is why we call people without insurance “unprotected families.” We’ve been helping people figure out this life insurance thing for a long time, so we’re best placed to put you with a life insurance provider who can cover you how you need to be covered. Get in touch today. 

Let us get to know you and do the hard work for you

Suicide and life insurance

16 Oct 2020

Life insurance is there to safeguard against accidents and unforeseen circumstances - so where does that leave suicide?
Read more

How much tax is deducted from life insurance?

29 Sep 2020

Whilst many life insurance policies pay out a tax-free lump sum, not every payout will be able to avoid taxation.

Read more

LifeSearch Limited is an Appointed Representative of LifeSearch Partners Limited, who are authorised and regulated by the Financial Conduct Authority. Calls may be monitored/recorded.