Trying to figure out life insurance? You’re not alone, and if you’ve come across “term” and “whole‑of‑life” insurance and thought, wait, aren’t they basically the same thing?, you’re definitely not the first and you won’t be the last! Though we do hope to reduce that number with this article.
The two phrases sound similar, but they’re built for very different life situations.
The wrong choice could mean paying more than you need to, or worse, not having cover when your family needs it most.
So if you’re exploring personal protection insurance in the UK and want a clear, pressure-free explanation, you’ve come to the right place.
What is Term Insurance?
Term insurance is straightforward: it covers you for a set period, often 10, 20, or 30 years. If you pass away during the term, the policy pays out. If you’re still around when the term ends (which, let’s face it, is what we’re all hoping for), the policy simply expires.
It’s a great option if you want to cover temporary financial responsibilities, like your mortgage, childcare costs, or general family expenses while the kids are growing up.
There are three main types:
- Level term – the payout stays the same throughout the policy.
- Decreasing term – the payout reduces over time, often used alongside repayment mortgages.
- Increasing term – the payout rises each year to keep up with inflation.
Because insurers know there’s a good chance you’ll outlive the policy, premiums are typically lower compared to whole‑of‑life cover.
What is Whole‑of‑Life Insurance?
Whole‑of‑life insurance covers you for, well…your whole life. As long as you keep paying the premiums, the insurer will pay out a lump sum whenever you die. It doesn’t matter if you pass away at 55 or 95, the payout is guaranteed.
This type of cover is often used for:
- Covering funeral expenses
- Leaving a financial gift or inheritance
- Planning for inheritance tax
- Ensuring lifelong dependents are looked after
There are two main versions:
- Guaranteed whole-of-life – premiums and payout are fixed.
- Investment-linked whole-of-life – part of your premiums is invested, which can affect the payout and cost.
Because there’s no expiry, this type of cover tends to cost more than term insurance, but for people who want certainty, it can be worth it.
What Does It Cost?
This is where things get real. The cost of your policy depends on factors like your age, health, lifestyle, and how much cover you need, but here’s how the two types compare in general.
Term Insurance
✅ Generally more affordable
✅ Premiums often fixed throughout the term
✅ Lower risk for insurers = lower cost for you
Example: A healthy 30-year-old might pay £10–£15/month for £250,000 of cover over 25 years.
Whole‑of‑Life Insurance
❌ More expensive
❌ You pay for life (or for a set number of years, depending on the plan)
✅ Guaranteed payout = higher insurer risk = higher premiums
Example: The same 30-year-old could pay £30–£50/month for £250,000 of lifetime cover, and those payments could continue for decades.
An AS Financial Tip: With whole‑of‑life, if you live a long time, you might end up paying more into the policy than your loved ones get out of it. Always do the maths.
Pros & Cons: Side-by-Side
Let’s break it down nice and clearly:
Term Insurance
Pros
- Affordable
- Good for temporary needs (mortgage, kids, debt)
- Flexible terms
- Simple to understand
Cons
- No payout if you live past the term
- Not ideal for lifelong dependents or estate planning
- May need reapplying later at a higher cost if your health changes
Whole‑of‑Life Insurance
Pros
- Guaranteed payout, no matter when you pass away
- Useful for legacy planning, funeral cover, or lifelong care
- Can be put in trust to avoid inheritance tax
Cons
- More expensive
- Complex if investment-linked
- May pay in more than the eventual payout, depending on lifespan
Who Is Each Best For?
Term Cover Suits:
- Young families needing cover while raising kids
- Homeowners who want to protect their mortgage
- Anyone on a budget looking for cost-effective protection
- People planning short-to-medium-term goals
Whole‑of‑Life Suits:
- Older adults thinking about funeral costs or legacy
- Those planning for inheritance tax
- People with lifelong dependents (e.g., a child with special needs)
- Anyone who wants long-term peace of mind, and is okay with higher premiums
Quick Tip: Review Regularly
Life changes ever so fast.
Whether you’re getting married, buying a home, having kids, or retiring, your protection needs shift with you. Term insurance might be ideal now but not later. Whole-of-life might be too much today, but perfect in a few years. Reviewing your cover every couple of years (or after major life events) keeps things on track.
Final Thoughts
There’s no one-size-fits-all answer here. Term insurance is often perfect for the now, it protects your family when they need it most, at a price that works for your budget.
Whole‑of‑life, on the other hand, is about the long game, legacy, certainty, and lifelong peace of mind.
If you’re navigating personal protection insurance in the UK and still feeling unsure, AS Financial can help!
Our advisers can walk you through your options, flag any gaps in your cover, and help you get what you actually need, not just what sounds good on paper.
