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Whole of life insurance explained

LifeSearch author Katie Crook-Davies
5 min read

by Katie Crook-Davies, Protection Writer

See author bio

Katie works with insurers and distributors to make protection propositions more accessible, pricing more transparent and marketing messages more simple.See author bio

Guide last reviewed 10 Oct 2023

You’ve probably heard of life insurance, but did you know that there’s a special type of life insurance that is guaranteed to pay out when you die? Whether you’d like to cover your funeral costs, pay an inheritance tax bill or simply provide a gift to loved ones, whole of life insurance can help. Here’s everything you need to know about this useful product.


What is whole of life insurance?

Whole of life insurance is an insurance product that pays out a tax-free lump sum amount of money when you die. The product protects you for the whole of your life (hence the name) and is guaranteed to pay out the benefit amount to your loved ones. This differs from term life insurance, which protects you for a set number of years. In other words, your family would only receive a payout from the policy if you died during the term of the policy.

Are there different types of whole of life insurance?

There are three main types of whole of life insurance:

  1. Standard whole of life insurance. This type of policy pays a fixed lump sum amount of money when you die. In return, you pay the insurer premiums on either a monthly or annual basis. It’s worth bearing in mind that you need to continue paying your premiums for the rest of your life in order to keep your insurance policy live and ensure your family receives the insurance benefit payout, so it’s worth considering what you’ll reasonably be able to afford in later life and in retirement. 
  2. Over 50s insurance. Over 50s insurance is a ‘guaranteed acceptance’ product, this means that everyone who applies is guaranteed to be covered. Insurers don’t ask any medical questions for over 50s insurance, and so this type of product is really useful if you suffer with medical conditions or have struggled to get standard life insurance in the past. These products are only available to people over the age of 50, hence the name, and you can choose the benefit amount when you apply for the policy. Just like for standard whole of life, you can also protect against the effects of inflation.
  3. Investment-linked whole of life insurance. Some insurers offer whole of life insurance policies with an investment twist. The insurer will invest part of the premiums you pay, and depending on the performance of the investment funds, the final benefit paid on death could be more or less than initially chosen. While these types of policy may provide a larger insurance benefit payout, they can also pay a lower one if investment performance is poor. This makes these policies riskier than standard whole of life insurance, and it’s for this reason that few UK insurers sell this type of policy.

At LifeSearch we only talk about standard whole of life insurance and over 50s insurance, because we believe that these products provide the financial certainty that families look for when planning for later life. If you’re not sure which type of whole of life insurance is right for you, call our team of friendly advisers on 0800 316 7253. They will work out which type of product you need based on your personal circumstances.

Who needs whole of life insurance?

If you have a family or a loved one who is dependent on you financially, you may want to think about whole of life insurance. The cash payout from these policies can be used however you like, but people tend to use these policies in the following ways:

  • To cover funeral costs

Whole of life insurance, particularly over 50s insurance, is often used to cover the costs associated with death. Funerals can be very expensive, in fact the average cost of dying in 2022 was calculated to be over £9,000 [1]. And that’s where whole of life insurance can help, covering these costs so that your family won’t need to worry about the finances and can instead focus on more important things.

  • To cover a tax bill

  • Your loved ones may be required to pay tax on their inheritance, this tax is called Inheritance Tax (IHT), and is currently set at 40% of the value of your assets over £325,000 [2]. So, if the sum of all of your assets is greater than £325,000, including any savings, property and investments, your family could face an IHT bill when you die.

    Whole of life insurance can be used to cover this IHT bill, paying out a benefit to match the amount of tax that your loved ones would have to pay.

    It’s worth bearing in mind that the payout from a whole of life insurance policy can also form part of the taxable amount, unless you put your policy into trust. This can be done when you apply for your policy and will mean that the benefits paid are protected from inheritance tax - so will go directly to your loved ones.

    We can work with you to build a protection solution that’s personalised to your situation and specific needs. Why not request a callback from one of our qualified advisers today to discuss your needs?

  • To leave a gift to loved ones
  • A whole of life insurance policy is a simple and effective way to provide a gift to your loved ones on death.

  • To help cover family living costs

The money paid out from a whole of life insurance policy can help to financially support your family when you’re no longer around. However, your family’s need for financial support will likely reduce over time, as debts like the mortgage get paid off and children move out and become financially independent, so you may actually find that a term life insurance policy could be better suited to your needs, and perhaps cheaper too.

How much does whole of life insurance cost?

The cost of your whole of life insurance will depend on a few things:

  • Your age
  • The amount of cover you choose
  • Whether you smoke
  • Your health 

The younger you are and the smaller the amount of cover you choose, the lower your premiums will be. Health and lifestyle also play a part in how much you pay for whole of life insurance. If you lead a healthy lifestyle and don’t smoke, your premiums will be lower, simply because you’re expected to claim on your policy later in life.

We all die at some point, which means whole of life insurance is guaranteed to pay out, so it’s often more expensive than term life insurance. You may, therefore, find that term life insurance is a better product option for you if affordability is a concern.



Find out whether whole of life insurance is right for you with free advice & quotes

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LifeSearch author Katie Crook-Davies
Katie Crook-Davies Protection Writer
Katie is an independent insurance consultant who is passionate about protection and wants to share that passion with others through engaging marketing content. She hopes that one day people will get as excited about protecting themselves and their loved ones, as she does!
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