Life Insurance Guide | Insurance Help Product Information | Whole Life Introduction

A whole life policy is a very simple policy that pays out a sum assured whenever the life assured dies. It is a permanent policy, not limited to an expiry date, as is term assurance. Because a claim will be certain, premiums will be more expensive than term assurance where a claim is merely possible, or at worst probable.

  • Non profit whole life policies
    A non-profit whole life policy has a level premium, payable throughout life. It pays only a fixed sum assured, whenever death occurs. There are also policies that offer a cessation of premiums on attainment of a certain age – often 80 or 85. These contracts are slightly more expensive, because premiums will be payable on average for a shorter period.
  • With profit whole life policies
    These policies are almost the same as non-profit whole life assurances, the only difference being that the amount payable on death is the sum assured, plus whatever profits have been allocated up to the date of death. A terminal bonus may also be payable by some offices. Again, premiums can be payable throughout life – or can cease at age 80 or 85.
  • Low cost whole life policies
    These policies are with-profits whole life contracts with a guaranteed level of cover. They are actually written with two sums assured. The amount payable on death is the greater of either A the basic sum assured plus bonuses or B the guaranteed death sum assured.

    Bonuses are calculated on the basic sum assured and thus the amount A increases year by year with the declaration of bonuses until it overtakes amount B. Consequently, the contract is in effect, a with-profits whole life policy incorporating a decreasing term assurance element which decreases as the bonuses increase.

    Premiums for this type of contract are lower than for ordinary non-profit whole life contracts, although benefits will not be as high as a full with-profits policy. Some offices will allow the difference between the basis and the guaranteed death sums assured to be converted into the basic sum assured, subject to the appropriate increase in premium.