Life Insurance – Whole of life vs level term

Life insurance comes in a lot of forms so that the choice on what kind of insurance to buy may be a bit confusing. Two of the more common types of life insurance include term life insurance and whole life insurance. Level term life insurance provides the same amount of coverage for a specific length of time, over which you pay the same premium. Whole of life provides a longer cover, usually as the name implies for the whole of your life. The reason you may choose one over the other depends on the purpose of the cover. 

Level Term: This covers the need to secure a mortgage or other high value loan, or to provide temporary life insurance cover until you can afford whole of life cover. The premiums will typically be cheaper than whole life cover, and when you are younger. As with many types of insurance the cost is likely to increase if you take out a policy when you are older. This policy will only pay the sum insured if you die while the policy is effective. If you die after the policy is finished, then there will be no pay-out. There will also be no refunds on your premiums if you outlive the term of the policy. There are other types of term insurance where the cover increases or decreases (along with the premiums) over the course of the policy.

Whole Life: The most common use for this type of policy is to provide income replacement in the event of a breadwinner’s death. It can also be used to ensure that a parent or child who needs constant care has enough funds to survive even in the event of the caregiver’s death. Estate planning needs where the proceeds of the insurance can pay for inheritance or estate taxes, is another potential reason for considering whole of life cover. A pay-out is provided when the insured person, or people, die for as long as the policy is in force. Premiums can be more expensive than term insurance, particularly at the outset. This is clearly because the policy will pay out at some point where a term insurance policy may well come to an end without being claimed against.

Your age, health, lifestyle and how much cover you need, as well as the type of policy you have, will all determine how much you pay in premiums. What you need to consider when looking at your life insurance requirements is what you want to cover. As always, I am happy to discuss your situation. Get in touch to talk about your life insurance needs.         

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