While many life insurance policies have fixed terms with expiry dates, whole
of life insurance is a special type of insurance that guarantees that you will
be paid out a lump sum when you die, without any restrictions on the term of the
policy - the only proviso is that you continue to pay your premiums. This means
that you can continue to pay life insurance long beyond your retirement age, for
example, and always be assured that your family will benefit.
Typically premiums are fixed for the first years of the policy, and then
increase as you get older - obviously because it becomes more of a certainty
that the policy will probably have to be paid soon.
There are different variations of whole life insurance policies:
- Whole of life insurance policies without profit - this is where you pay
a level premium during your life and the sum that you are paid out remains
fixed (note, however, that the relative value of this sum will decrease due
to inflation).
- Whole of life insurance policies with profit - this is where you are
paid out a predetermined fixed amount, plus profits that are allocated to it
by the insurance company (usually based on the interest that has accrued on
the premiums you have paid).
- Whole of life insurance policies at special low rates - these are budget
options where you are guaranteed that the lump payout will at least be
higher than the total of the premiums that you have paid.
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