Whole-Of-Life Insurance (WOL):

Whole-of-life insurance pays out an agreed sum when you die, whenever that is, as long as you are still paying the premiums.

WOL are life assurance policies with and investment element although in some circumstances you may pay more than you get back.

Cost

Whole of life policies will cost more than term insurance policies, partly because they will pay out whenever you die, but also because of the various charges that come with them.

The cost of either type depends mainly of the likelihood of the insurer having to pay out – so if you're a smoker and do a dangerous job, you'll pay more than a non-smoking office worker. Life insurance also costs more for men because, on average, they don't live as long as women.

Always compare what's covered by a policy, not just the price. Some might be cheaper than others, but they may not offer the same level of protection.

Key things to think about

Check for exclusions – in other words when the policy won't pay out. For example, most do not cover death due to alcohol or drug abuse. You might not be covered while taking part in risky sports. If your health is poor when the policy starts, some causes of death might be excluded or you might be refused cover altogether.

How flexible is the contract? Can you reduce or increase cover easily as your circumstances change? Are there extra charges for doing this? Does cover stop immediately if you miss a payment or is there a period of grace?

By paying extra, you can usually include a waiver of premium. It pays the premiums if you can't work because of a long-term illness so that your cover is not interrupted.

If you want to change insurer, check the level of premiums for the new contract before switching (premiums may have gone up because of older age or because you have developed medical conditions). Also check the new level of cover compared to the previous one. Different benefits may be available, and different exclusions may be applied, for example you may not be covered for medical conditions that have developed before the switch even if these were covered under the previous contract.

If you do decide to change, make sure you do not cancel your original cover until you are fully covered by the new contract. The policy can be set up under trust. This means that in the event of death, proceeds of the policy are paid directly to dependant(s) of your choice. Provided a trust is set up properly, there may be benefits to doing this. However, using a trust may not be suitable for everyone and because of the complexities we recommend you seek financial and legal advice. This is where we can help.

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