If you have a medical condition, we can help - call us at Have a medical condition? Call us: 057 93 20836

How To Buy Life Insurance & Get Money Back If You Outlive It

September 25 2019 4 min read Life Insurance Over 50s Life Insurance

 

life insurance you can cash in (if you don't die)

You’ve probably read that title and recoiled a bit with the bang of BS off it.

Maybe you’ve rubbed your chin in contemplation, and you’re thinking, “but sure the whole point of Life Insurance is to give your family money after you give up the ghost.”

Give up the ghost. Kick the bucket. Cash in your chips. Popped off. Snuffed it.

Exit stage left.

Die.

Whatever you want to call it.

And yes, you’d be right. It does sound farfetched, but you can buy Life Insurance with cashback. It’s all a matter of knowing a guy who knows a guy who knows about insurance — or knowing a guy who knows how to Google and ended up on this here part of the internet.

And the cashback is a whopping 70% of the premiums you have paid.

Introducing Life Insurance with Cashback

With regular Life Insurance, you pay a monthly premium/cost, and you’re insured. This will cover you for either

a) the length/term/years of the policy that you chose (e.g. 25 years) or 

b) the whole of your life.

When you kick/sniff/cash/pop etc. etc., your loved ones get a tax-free lump sum to mask their grief with wads of cash pay for your funeral. The extent of the “wads” will depend on how much insurance you bought.

Term Life Insurance, which is the one with a limit, i.e. a term, is generally less expensive. The insurer is betting you will outlive the policy so they get to keep your money and not have to pay out when you die.

Sch-neakkkkky.

Whole of Life Insurance, as the name suggests, covers your whole life. Because there will be a certain payout, whole of life costs more than term.

Enter Royal London’s Life Changes Option, which is a new type of Whole of Life insurance

What is the Life Changes Option?

Fun fact: Royal London’s brochure for the Life Changes Option has a fetching man in a hat on the cover, with the slogan ‘Giving you a whole lot more.’ He has a stack of hats in front of him.

Who wouldn’t want a stack of hats?

That’s how you know it’s legit.

No, but in all seriousness, this is a pretty good policy choice. I’m going to explain the ‘why’ of it in a minute once I stop slagging the pile of hats.

Marketing eh (👋 marketers, you know I ♥ you)

So the Life Changes Option is a Whole of Life policy – which means it covers your whole life and is guaranteed to pay out, presuming you keep paying your premiums and don’t do something complete bonkers to nullify it.

Show me the money: How do I get the pay-out without dying?

Okay, so it’s not quite as sound as it sounded. Remember: insurers are there to make money, not to line yer pockets.

Deep breath.

We’re about to give it a good sniff to check it out.

So, if you take out the Life Changes Option with Royal London and pay your policy for at least 15 years, you can choose between two options:

  1. You can stop paying your policy and choose to receive a lower payout when you die. This would be useful if you can’t afford to keep paying your premiums when you retire. The kids will be all grown up by that stage so you won’t need so much cover – maybe only enough for “final expenses” i.e. your funeral. Yep, we’ll all need one at some stage.
  2. You can cancel your policy and take an instant cashback. Again, this is useful if you can’t keep paying your premiums for whatever reason, or if your kids are no longer financially dependent on you.  It could be particularly useful, for example, if you need the money for healthcare reasons as you get older.

However, the Cashback Option is 10 per cent more expensive, so you’re gonna pay more for this luxury.

The longer you continue to pay your premiums before stopping (let’s say 20, 25 years) the higher the claim or cashback will be.

Don’t worry; we’ll look at examples now in a tick.

How much cashback can you get back?

Option 1: Stop paying your premium now and get a lower sum when you die.

With this one, the revised amount takes into account the number of premiums you pay and the number you would have got presuming you would have lived to be 100. It’s based on a formula of original cover amount x (amount of months you have paid for / amount of months you could have paid for up to age 100).

Yay maths.

Did that make sense to you? Nope, well Royal London doesn’t care so you just have to accept it.

An example, forthwith.

Tom, aged 50, takes out €80,000 Whole of Life Insurance with the Life Changes Option. After 15 years, Tom stops paying the premiums and gets free cover of €24,000 for the rest of his life. Like so:

cashback table

It’s a bit more complicated for couples because the age of both partners come into play around who is younger (and further from 100).

Option 2: You take instant cashback and end the policy.

The amount you get back will be 70 per cent of the premiums you have paid so far (excluding the Government levy at 1 per cent).

An example, using Tom above, will clear things up.

He paid €110 per month for his €80,000 cover for 15 years i.e he paid premiums of €110 x 12 x 15 = €19,800.

Tom can cancel his policy, and Royal London will pay him back €13,860 (70 per cent of his premiums) in cold hard cash.

cashback table 2

What else do I need to know about Life Changes Option?

1. You stop paying premiums at 100.

Just wait until all of civilisation live in flesh-robots and are created in artificial wombs. Royal London are gonna be so pissed about this ‘100+ policy’.

Look, I don’t know how many of us are going to live past 100, but what I do know from the papers is that the secret to living that old is to avoid men and drink a whiskey a day.

Either way, if you live past 100, the premiums are free. Why? Because that’s the cut-off for the calculations above.

2. You can bail on paying premiums but still have some cover.

Sure, it won’t be the full shebang, but it can be an option if your financials are under pressure or if you’re happy with the amount of cover you’re leaving behind.

3. It’s available from age 18.

The other insurers have a minimum age of 40.

4. You can use it to avoid an inheritance tax bill for your children.

Again, this can be a bit complicated, so make sure you know what you’re doing. Talk to a professional, i.e. me.

5. Terminal Illness Cover is part of the policy.

If you’re diagnosed with an illness that has no cure and which will kill you within 12 months, the policy will pay-out.

6. You get Helping Hand.

Helping Hand gives one‑to‑one personal support from your own Nurse Adviser from Red Arc who can help you and your family cope with the effects of illness or bereavement.  

How much does Life Insurance with cashback at the end of the term cost?

We can’t quote online for Whole of Life Insurance with a refund of premium. But get in touch, and I’ll quote for you and compare it to quotes from our other providers.

As you appreciate from reading the above, Life Insurance with a guaranteed cashback is going to have higher initial premiums than term life insurance.

Because 15 years from now, you can get your hands on 70 per cent of the money you paid.

Let’s take Fiona, a 40-year-old buying €250,000 worth of cover. She wants cover until age 90.

  • The premium on a 50-year term life insurance policy is €100 per month:

This could cost her €60,000 in premiums but will pay out nothing if she celebrates her 90th birthday.

  • The premium on a whole of life policy with cashback is €255 per month:

This could cost her €183,600 in premiums (to age 100) but there is a guaranteed payout of €250,000

And at any time from age 65, Fiona can cancel the policy and get back 70% of her premiums.

This could be a game-changer.

Business All Star Accredited Life Insurance Badge

 

life_insurance_schedule_a _call

Life Insurance Over 50s Life Insurance
Give us a quick outline of how we can help and we'll be right back to you.

Arranging Mortgage Protection | What You Need to Know

Banks tell lies, that's common knowledge.

Forewarned is forearmed.

So here's what you can expect to hear from your banker when it comes to mortgage protection.

Don’t know where to start?

Have a nose through our free guides

View our guides

Life Insurance Quotes - Free and Easy!

We’re an online life insurance broker. We compare life insurance quotes for mortgage protection, life insurance, specified illness cover and income protection from all 6 leading life insurance companies in Ireland, instantly and anonymously.

Watch our video