There are similarities between whole of life insurance and term insurance in that both forms of life insurance pay out a specified sum to the bereaved when the person whose life is insured passes away. However the similarity stops there. Whole of life policies pay out whenever the insured dies, regardless of when that is, whereas term insurance policies only pay out if the insured party dies within the specified time frame of the policy.

Because of this fundamental difference, term insurance, and in particular short term insurance, normally works out a whole lot cheaper than its whole of life cousin. This is due to the policy being set within a time frame, so there is a chance that the insured party will outlive the policy and therefore will receive no payout. By contrast, whole of life policies are guaranteed to pay out on death, and as death is inevitable, there is no chance of a non-payout so these policies are more expensive.

Another reason why whole of life policies usually work out dearer is that the vast majority of them accrue an investment element over time, with the added extra price tag. It is important to note at this stage that whole of life policies are not the most recommended of savings plans, so if a good investment is what you are after you would be well advised to consider an alternative.

Whole of life insurance policies include this investment quotient as a way of covering the growing costs of insuring against the death of the person insured. To clarify this, when you take out a life insurance policy, the insurance company has to start off by working out the chance of you dying and when that might happen and then calculate the policy accordingly. This is difficult with whole of life, as the insurance company has no idea of when you may die and therefore no idea of the length of the insurance policy. Because they cannot see into the future, the investment part can be added in for them in order to cover the costs of the chance that you may live for longer than they predicted.

Now to get to the second part of the article, how to make it less expensive. Now with any whole of life insurance policy there are levels on which they are quoted. Three are based on premiums and three are based on benefits. Now they are essentially the same but the difference is whether the individual client wants a certain sum assured or whether his interest lies with the premium levels.

Let us first look at premium based maximum benefit plans. The quote is basically formulated with the goal of producing the best benefit based on a particular premium payment. Therefore you will be receiving the best benefit possible for the lowest possible premium. However, this sort of plan is only available for 10 years, after which the plan is subject to review. This will result in either the premium going up or the sum assured going down, depending on the review. The investment element usually suffers a bit with this sort of plan, so do not expect a great return for your investment here.

The next plan we will discuss is standard cover. Standard cover plans will formulate a quote which will hold true for the life of the contract. This is the best sort of whole of life insurance as it is the best formulated quote for the long term. This is because the life insurance broker is giving you their quote based on what they think it will cost to provide you cover for the rest of your life, so the quote is fixed.

The last option is minimum assured cover. This will definitely be the most expensive option as it depends primarily on investment to create cover. As such, there is little contribution towards a life insurance policy. Before embarking on this sort of plan, it is extremely advisable that you discuss it with your financial advisor first. If investment is the way you have decided to go, there are better performing and more cost effective options available to you than using a whole of life insurance policy to do it.

So for a standard premium there is standard cover, for maximum premium there is minimum cover, and, it goes without saying, for minimum premium there is maximum cover. What is important is that no matter what sort of policy or cover you think you would like, always consult an independent financial adviser before making that final decision. His professional experience will be better suited to advising on a policy that will apply to your individual situation and needs, both now and in the future.

In conclusion, then, by opting for either maximum cover or minimum premium when going for whole of life insurance, there are definitely savings to be made. But you should keep in mind that the true cost will need to be met at some time during the span of your whole of life insurance policy. That said this is still a good way of at least getting some form of life insurance cover at a rate that is affordable to you now. It will at least give you some form of reassurance and comfort for what will lie ahead in your future.