Table of Contents
If you’ve built up a valuable home, business or farm, you’ve probably had the same thought as most parents:
“I don’t mind leaving something to the kids…
…I just don’t want Revenue taking a third of it.”
That’s exactly what a Section 72 life insurance policy is designed to help with.
It doesn’t reduce the inheritance tax bill.
It gives your family the money to pay it, without having to sell assets in a hurry.
If you’re unsure how inheritance tax is calculated, start with our complete inheritance tax guide.
Section 72 refers to a specific provision in Irish tax legislation that allows the proceeds of a qualifying life insurance policy to be used to pay inheritance tax without the policy payout itself becoming subject to further tax.
In simple terms, if structured correctly:
The insurance proceeds can qualify for favourable tax treatment when used to pay the inheritance tax liability and the requirements of Section 72 are met.
This isn’t a loophole. It’s a long-established planning tool recognised under Irish tax legislation.
However, it only works if the policy and the underlying estate planning are aligned properly.
If you’ve worked hard to build a home, business, farm or investment portfolio, you’ve probably had the same thought as many parents:
“I’d rather my children inherited it than Revenue.”
That’s exactly what a Section 72 Life Insurance policy is designed to help with.
It doesn’t reduce the inheritance tax bill itself. Instead, it provides a Revenue-approved life insurance payout that can be used to pay that bill, helping your beneficiaries avoid selling property or other assets to raise the money.
Provided the policy meets the requirements of Section 72 and the proceeds are used to pay the inheritance tax liability, the payout can qualify for favourable tax treatment.
You can, but it’s usually not the best approach.
A standard life insurance policy pays a lump sum to your beneficiaries, but that payment can itself form part of the taxable estate, potentially increasing the inheritance tax bill.
Section 72 exists specifically to avoid that problem. It’s one of the few situations where using the correct type of policy really matters.
John and Mary own a family home worth €850,000 along with savings and investments of €350,000.
When the first spouse dies, everything passes to the survivor without inheritance tax.
When the second spouse dies, however, their children could face a significant inheritance tax bill depending on the tax-free thresholds available at that time.
Rather than forcing the family to sell investments or even the family home to raise cash for Revenue, a correctly structured Section 72 policy can provide the money needed to pay that tax liability.
Every family’s circumstances are different, which is why the amount of cover should always be based on advice from your solicitor or tax advisor before the insurance is arranged.
The starting point is estimating your family’s likely inheritance tax exposure.
No one can predict this exactly because several things can change over time, including:
That’s why any figure is an informed estimate rather than an exact science.
We normally recommend confirming the likely tax liability with your solicitor or tax advisor first. Once that figure is established, we can structure the insurance to match it.
For married couples and civil partners, Section 72 policies are usually arranged on a joint life, second death basis.
That’s because assets normally pass between spouses free of inheritance tax on the first death.
The tax issue usually only arises when the second parent dies and the estate passes to the children.
By arranging cover on a second death basis, the policy pays out at exactly the point the inheritance tax bill is likely to arise.
They often do.
If parents would struggle to afford the premiums themselves, it’s common for adult children to help because they’re ultimately protecting their own inheritance.
However, insurers generally don’t like children directly insuring the lives of their parents.
A more common solution is for each child to use their annual small gift exemption to gift money to their parents, who then pay the premiums themselves. This should always be discussed with your tax advisor as part of the wider inheritance planning.
Section 72 uses Whole of Life insurance, so it’s naturally more expensive than term life insurance.
That’s because the insurer knows the policy will eventually pay a claim, provided the premiums continue to be paid.
You’re paying for certainty rather than cover for a fixed number of years.
The final premium depends on your age, health, smoking status, the amount of cover required and whether you choose guaranteed or reviewable premiums.
Some insurers also offer options such as premium refund features, although these increase the monthly cost and aren’t suitable for everyone.
Once you’ve established the likely inheritance tax liability, we can compare the available insurers and recommend the most appropriate way to structure the policy.
The required cover depends on:
This is where boundaries are important.
We are not tax advisors and we do not calculate full estate liabilities.
Before arranging a Section 72 policy, your solicitor or tax advisor should confirm:
Our role is to structure the insurance correctly once that tax position is understood.
Section 72 policies are whole of life insurance policies.
That simply means the cover is designed to stay in place for life and pay out whenever death occurs, provided the premiums are maintained.
Whole of life is priced differently to term cover because the insurer expects to pay out at some stage. You’re paying for certainty rather than a fixed time window.
To put some numbers around it, a healthy 45-year-old non-smoker looking for €1,000,000 of whole of life cover in 2026 might expect premiums in the region of €1,000 to €1,150 per month, depending on the insurer and structure chosen.
Most Section 72 policies are for much lower amounts than €1m. Many are arranged to cover projected inheritance tax liabilities in the €100,000 to €400,000 range, which means the premiums are proportionately lower.
What affects the price?
Some policies offer guaranteed premiums that stay level for life. Others are reviewable, which means premiums can increase in the future. Reviewable options often start cheaper but can rise significantly at later review dates.
Certain structures also offer partial premium refund features after a set period. These tend to cost more each month and need to be weighed up carefully.
There is no minimum cover requirement written into Section 72 legislation. The policy simply needs to reflect the estimated inheritance tax exposure.
We do not provide an online Section 72 cost calculator. The starting point should be confirming the likely tax liability with your solicitor or tax advisor. Once that number is clear, we structure the insurance to match it.
Sometimes.
If your estate grows significantly over time, you may be able to increase your cover, but this usually depends on your age, health and the insurer’s underwriting requirements at that time.
That’s why it’s worth reviewing your inheritance tax planning every few years, particularly after buying property, growing a business or receiving other significant assets.
Important:
A Section 72 policy is only one part of an inheritance tax plan.
The insurance should complement advice from your solicitor and tax advisor, not replace it. Getting the tax planning right first makes it much easier to arrange the correct level of insurance afterwards.
Section 72 planning is not something to set up casually.
If the policy is not structured correctly, the tax treatment may not apply as intended.
If underwriting is delayed and health changes, securing cover later may be difficult or more expensive.
If estate planning assumptions are wrong, the level of cover may be insufficient.
This is why sequencing matters.
The tax position should be clarified first.
Then the insurance is arranged to match it.
Being accepted by an insurer does not automatically mean the structure is correct from a tax perspective.
Many clients are surprised to discover that a single family home, together with modest savings and investments, can already push an estate above the available tax-free thresholds.
Section 72 policies are typically relevant for:
Many people assume Section 72 is only for the very wealthy.
In reality, rising property prices mean ordinary families can now find themselves with estates that exceed the available inheritance tax thresholds. A valuable home combined with savings, investments or a family business can quickly create an unexpected tax liability for the next generation.
They are not usually relevant for smaller estates that fall comfortably within available thresholds.
Related guides
If you believe your estate may face an inheritance tax liability, the first step is to confirm the likely exposure with your solicitor or tax advisor.
Once that is clear, we can:
If you would like to explore the insurance side of this, complete the form below and we can begin that process.
Or, if you would prefer an initial discussion:
Written by Nick McGowan, QFA RPA APA
Nick is a qualified financial advisor and founder of Lion.ie, an independent Irish life insurance and income protection brokerage based in Tullamore.
He’s been helping people get fair, transparent cover for over 15 years and was named Protection Broker of the Year 2022.
If you would like straight answers without the sales pitch, learn more about Nick here.
As Ireland's leading life insurance broker, we specialise in comparing the rates and policies from the top five Irish life insurance providers and offering the very best value quotes to suit the individual needs of our clients. Our expertise lies in finding a suitable insurance plan for those with specific needs, be it a particular illness, occupation or claim history, we've got you covered in every sense!
Watch our video
