Term life insurance vs whole of life insurance

The main difference between term life insurance and whole of life insurance is the length of cover.

Term life insurance provides cover for a set time period that is agreed at the point of application, whereas whole of life insurance provides lifelong cover.

Whole of life insurance provides life long cover, this means that your loved ones will receive a pay out when you pass away, not if.

You’ll pay a monthly premium for your cover. To keep your cover in place, you’ll need to pay premiums for the rest of your life.

Due to this, whole of life insurance is often best suited to those later on in life who’re still in good health.

Taking out a whole of life policy could result in you paying more into the policy than it’ll pay out to your loved ones.

A joint life insurance policy covers two lives simultaneously.

There’s one application and one policy. However, this means there’s only one pay out (usually upon the first death).

Once a claim has been made, the policy will expire and the surviving partner will need to find new cover.

Whole of life insurance and term-based life insurance taken out on a joint basis could save you up to 25% compared to two single policies.

Get in touch with Reassured to find out the joint policy options available.

Term life insurance can be beneficial to parents as a way of helping to protect future living expenses for their children.

As your children get older, they become less reliant on you financially.

If you have younger children, you may choose to take out level term life insurance as your sum assured will remain fixed.

This will allow your pay out to help cover living costs if the worst were to happen.

If you have older children, you may choose decreasing term life insurance as their need for financial help will reduce as they approach adulthood and can support themselves.

In contrast, you may want whole of life insurance in place to provide peace of mind that your pay out will help cover your family’s living costs no matter when you pass away.

A pay out from a whole of life insurance policy can also be left as an inheritance for your children to enjoy as they wish.

With term life insurance you’ll need to provide medical information in order for insurers to calculate the risk you pose.

Due to this reason, it’s unlikely to find term life insurance that won’t ask questions related to your health.

Any term policies that don’t ask for medical information will often come with loaded premiums to compensate for the unknown risk.

In contrast, it’s possible to obtain whole of life insurance with no medical questions asked in the form of an over 50s plan.

Over 50s plans guarantee acceptance to UK residents aged 50 – 85. Once accepted, you’ll be covered for the rest of your life, with no need to provide medical information.

However, due to the unknown risk you pose, insurers often add a waiting period to the policy.

Typically, the waiting period will be the first 12 - 24 months of the policy. If you pass away during this time, no pay out is made. (Although any premiums paid will be refunded).

Over 50s plans also come with loaded premiums and a restricted sum assured (up to £20,000) to compensate for the unknown risk to the insurer.

Terminal illness cover comes as standard with any term life insurance policy taken out through Reassured.

Most whole of life insurance policies now also offer terminal illness cover (although this will depend on the provider).

Both term and whole of life policies arranged through Reassured come with terminal illness cover as standard.

Terminal illness cover will allow you to make an early claim on your life insurance policy if you’re diagnosed with a life-threatening illness and predicted to pass away within 12 months.

This pay out can help to pay for medical treatment, hire a carer or make any necessary adaptions to your home.

You may want to read our article on terminal illness vs critical illness cover.