Let’s face it—thinking about our own mortality isn’t exactly pleasant. But while we can’t avoid death, we can prepare for it. And that’s where whole life insurance comes in.
Whether you’re planning ahead for your family’s financial security or looking for ways to reduce the impact of inheritance tax (IHT) on your estate, a whole of life policy could be one of the smartest financial decisions you’ll ever make.
In this article, we’ll break down what whole life insurance is, how it works, and why it might be the ideal addition to your long-term financial strategy.
What is Whole Life Insurance?
Whole life insurance—also known as life assurance—is a type of policy that covers you for your entire lifetime. That means no matter when you die, your loved ones are guaranteed to receive a lump sum pay-out.
This is in contrast to term life insurance, which only pays out if you pass away within a set period (e.g., 10, 20 or 30 years). With whole life insurance, the cover lasts as long as you live—provided you continue to pay the premiums.
How It Works
You pay monthly premiums to your insurance provider, and in return, your policy guarantees a payout upon your death. There are three main types of whole life cover:
- Standard Whole Life Cover – Straightforward protection with guaranteed or reviewable premiums.
- Unit-Linked Cover – Part of your premium is invested, potentially increasing your payout.
- With-Profits Cover – Combines a guaranteed amount with bonuses based on the provider’s performance.
Each has its pros and cons, so it’s worth speaking to an adviser to find the right option for your circumstances.
Why Buy Whole Life Insurance?
Here are just a few reasons why a whole-of-life policy might be the right choice for you:
1. Protect Your Family’s Finances
If you’re the main breadwinner, what happens to your family when you’re no longer around?
A whole life policy can help cover:
- Household bills and daily living expenses
- Mortgage or rent repayments
- Outstanding debts or loans
- Childcare and education costs
- Funeral expenses
This kind of support can lift a significant burden during an already emotionally difficult time.
2. Permanent, Guaranteed Cover
Unlike term insurance, which has an expiration date, whole life insurance covers you no matter when you die. That’s why it’s often referred to as “life assurance”—your family will always receive a payout, which brings peace of mind that lasts a lifetime.
3. Leave a Legacy for Your Children
Whether it’s helping your kids buy their first home, fund their education, or simply giving them a financial cushion, a whole life policy ensures you’re still providing for them—even after you’re gone.
4. Joint Cover for Couples
Whole life insurance can also be arranged as a joint policy for couples or business partners. It typically pays out on the first death, offering a simple and often more affordable way to protect shared responsibilities, like a mortgage.
5. Fixed Premiums
One of the biggest advantages of a balanced whole life policy? Your premiums stay the same—forever. No nasty surprises as you get older or develop health issues. What you sign up for is what you pay, making it easy to plan long-term.
(If you prefer, you can choose an increasing policy, which adjusts the cover—and premiums—each year to keep up with inflation.)
6. Tax-Free Payout (When Placed in Trust)
This is where it gets really interesting.
The payout from a life insurance policy is technically tax-free, but it can become subject to inheritance tax if it’s added to your estate.
Right now, the inheritance tax threshold sits at £325,000 (or up to £500,000 if you leave your home to direct descendants). With rising property values and frozen thresholds, more and more families are finding themselves unexpectedly caught in the IHT net, with the government collecting record levels in tax.
Enter: Life Insurance in a Trust
By placing your whole life policy into a trust, the payout is kept outside your estate. This means:
- It won’t be subject to 40% inheritance tax
- Your beneficiaries get access to the money quickly
- It can be used to pay off the IHT bill on the rest of your estate
This is a lesser-known but highly effective way to preserve your wealth and ensure your loved ones inherit as much of your estate as possible.
Is Whole Life Insurance Right for You?
It depends on your goals. If you’re looking for long-term certainty, want to leave a guaranteed inheritance, or are concerned about rising IHT, then whole life insurance is a compelling choice.
Before making any commitments, speak to a financial adviser or insurance expert. They’ll help you understand the costs, options, and how to structure the policy (especially if you’re considering placing it in trust).
Final Thoughts
Whole life insurance is more than just a safety net—it’s a powerful planning tool. Whether your goal is to protect your family, leave a legacy, or shield your estate from hefty taxes, this type of policy offers security that lasts a lifetime.
In a world where so much is uncertain, that kind of guarantee is worth its weight in gold.
Need help deciding on a policy or setting up a trust? Speak to a Broadbench specialist today and take the first step toward financial peace of mind for you and your family.
For more information about Inheritance Tax, go to: https://www.gov.uk/inheritance-tax
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