What Are The Pros And Cons Of Whole-of-life Insurance?

A whole-of-life insurance policy is a form of investment-type insurance, that is it provides a means to getting your hands on a cash return while you're still alive, unlike with protection-only or 'term' life insurance, where only your dependants will see the money and only if you die within the set term anyway. Whole-of-life certainly has the advantage of being both highly protective, in that it provides cover for as long as you live, and flexible, in the sense that you can access the cash value the policy has built up by surrendering that policy. The disadvantages are that it can take many years for a value to build up that is worth surrendering the policy for and this type of policy is expensive, especially if your primary concern in taking out life insurance is overwhelmingly protection of your family and dependants rather than finding another investment vehicle. If that's the case, you're better off with the cheaper protection-only type of life insurance.

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I disagree with the ability to take a cash sum from a whole of life policy. It is certainly available, but you would then have negated the very reson you started the policy in the first place, to provide protection.

And if you then need to renew that protection - how much is it going to cost now that you are older. Have you had health problems in between? Are you even insurable?

The main advantage of a whole of life policy is that it is guaranteed to provide a level of protection for your next of kin at a fixed pre-determined cost. Unlike universal whole of life, the cost will not rise in the future.

If you are planning on using a whole of life policy simply to get your hands on a cash return at some later date, you would be better off with a cheap term polcy and an asset backed investment using the difference in cost.

You should therefore take specialized advice from a financial planner.

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