If you have concluded that you could do with some life insurance to give you financial protection for your family or even to pay off your mortgage should you pass away, then you are one step closer to peace of mind. However, that said even once you’ve made that decision the next big decision is the kind of life cover most suitable to you and your personal situation.
We would always suggest you seek independent financial advice in any aspect of life insurance but in today’s blog, The Cheapest Life Insurance looks at some of the differences between term life assurance and whole of life insurance.
One of the biggest differences between these life insurance types is the length that the cover is in place for. You could say that the titles are the key to their differences too. Term insurance runs for a specific length of time before it finishes. Whole of life insurance means you have cover for your entire life.
At the age of 30 you took out your very first mortgage over a 25year term then you might make the decision to take out some kind of life insurance, so that should something happen to you your mortgage would be repaid in full. In this case then you might take out a life term insurance policy for 25 years for the mortgage for this purpose. If you do not pass on during those 25 years then the policy would end and you would not get anything back. However, by the end of the 25 years you would have paid off the mortgage anyway.
If you chose a whole of life policy instead for your mortgage then the payments for that insurance would continue after the mortgage had ended. The benefit here would be a financial lump sum payable to your family or benefactors upon you passing away.
Comparison in cost
Whole of life cover tends to be more expensive as it is ongoing so you do need to think carefully about this before taking out a policy.
There is more flexibility with Whole of Life insurance policies compared to term life insurance because you can increase cover if your policy is medically underwritten. It all depends on you of course and your personal situation.
It is important to note that life insurance policies are not savings plan as they have no investment value. For example, you cannot sell them. However, they do have financial benefit to those around you should something happen, which for many people is important, particularly if there are children to consider.