Making the decision to go ahead and take out a life insurance policy is a huge step in the right direction. 👣
The next decision you’ll need to make is whether to choose a term life policy or whole of life insurance. Although there are pros and cons to each, it is your decision and should be based on what your individual circumstances and requirements are.
Whole of Life Insurance
Whole of life cover does exactly what it says on the tin – your insurer will pay out your death benefit no matter when you die and your policy covers you for your whole life.
Pros to whole of life insurance
✔️ No need to renew as it lasts your whole life ✔️ Can be linked with various investments ✔️ Guaranteed security for your loved ones
Cons to whole of life insurance
❌ Less flexibility with no option to change premium payments ❌ More expensive ❌ Fixed-rate could mean less value for money
Term Life Insurance
Term life insurance covers you for a set period of time and ensures that your loved ones would get a payout if you die within that period. If you take out a 40-year policy and you pass away within 40 years, your beneficiaries would receive a cash lump sum from your insurer. The length of cover determines the price of your monthly premiums. 💷
Pros of term life insurance
✔️ No hidden costs and easy to understand ✔️ Lower premiums with maximum benefit ✔️ Can be used as temporary cover for financial commitments such as a mortgage
Cons of term life insurance
❌ Term eventually ends and you may need to take out another policy with higher monthly premiums ❌ Capital is not accumulated, so you won’t be able to take out money from your policy ❌ Could be seen as more uncertain later in life
This type of life insurance is normally a more than sufficient policy, as most people only need life insurance cover until they are either retired or perhaps their youngest child is no longer dependent. There isn't much reason to get life insurance past that point as no one is specifically dependent on you.
What life insurance policies do we offer?
At Bequest, we currently offer Term life insurance policies, with two options - level term and decreasing term cover. ✌️
- The amount paid to your loved ones remains the same throughout your policy. This can help you to ensure your loved ones would be able to maintain their standard of life even after you’re gone.
- The payout decreases as time goes on. These kinds of policies are often used to cover the balance of a mortgage repayment. As the total mortgage amount outstanding decreases over time, so would your payout. The amount by which it goes down is the equivalent to an annual interest rate of 8%.
Term vs. Whole life Insurance: How do you choose?
Your life policy and payout are completely personal to you and you could get up to £500,000 paid to your loved ones if the worst was to happen. We have an easy, no fuss claims process and we don’t ask you to take a medical exam. 🙌
Whether it's term life insurance or whole life, we know it can be a little confusing trying to figure out what’s best for you and your loved ones, and we hope to have answered some of your questions on the differences between term and whole life insurance. If you get a term policy with us, it’s a step in the right direction to protecting your family’s future and we think that’s the best gift you could ever give them. 🎁