The Pros and Cons of Whole of Life Cover

There are two main types of life insurance, Whole of Life cover and Term Assurance cover.

As the name suggests, Whole of Life insurance can cover you for your entire life whereas Term Assurance is put in place for a set term such as 10, 20 or 30 years.

Whole of Life insurance often costs more in premiums but means you get a guaranteed sum of money when you pass away at any age, so some people will see it as a form of savings account for their next of kin when they pass away.

Term insurance costs less in premiums but if you don’t pass away during the term of the cover, there will be no payment and so the money you’ve paid in is gone forever.

In this blog we’ll delve into the pros and cons of Whole of Life insurance.

Pros

Permanent – As long as you keep paying your premiums the policy can last for the rest of your life. There are certain options available in the market where you pay premiums for so many years, similar to term insurance, but then you stop, and your cover will continue for the rest of your life. The cover won’t be as high when you stop paying your premiums but you will still receive a substantial cash sum.

Peace of mind – This is a more emotional benefit, but it provides you and your family with peace of mind that if you passed away they would be financially looked after.

Cost – Cost can be relatively cheap given the benefit of the policy.

This is a sample quote for a policy in the market that combines term and whole of life insurance for a couple aged 35 who are non-smokers. If they need cover of €250,000 each for a time period 25 years, they will pay €81 a month.

Over a 25-year period, this means a total cost of €24,300. If they die during the 25 years, they will be paid €250,000 on each death. If they die after the 25 years, the sum of €30,000 will be paid on each death, whenever that may be, meaning a minimum total payout of €60,000.

Cons

Cost – It’s both a benefit and a con. Due to the length and guaranteed pay out of Whole of Life cover, it generally costs more in premiums per month compared to Term cover.

Smaller death benefit – Due to there being a guaranteed payment at some point in the time, the benefit paid out on death in a Whole of Life policy is generally less than if you had a term policy paying the same monthly premium. If you needed a high amount of insurance, a Term Assurance policy would be more cost effective.

The thought of mortality – It’s not necessarily a major con but most people don’t like to think about their own demise. Life insurance focuses on the worst possible scenario for a lot of people so it’s understandable that they avoid it but unfortunately it is something you have to consider as you get older.