Whole of Life Insurance that Pays for Itself

Bad manners

Queuing

Faux outrage

Those are a few of my least favourite things.

So what do the things that piss me off have to do with your life insurance?

Well, the things that piss everybody off about life insurance are:

1. Having to pay for it
2. Not getting anything from it

Fear not, my angry friends, I have the solution – life insurance that can pay for itself and is guaranteed to pay out eventually!

Listen up, and I’ll tell you all about it but first, let’s look at the two types of whole of life insurance you may have already heard of.

1. Reviewable Whole Of Life Insurance – Puke

This type of cover is shite.

Some boffin designed these policies to get so expensive that you eventually cancel so they never have to payout. Unfortunately, you’re then financially exposed at the exact time you need it most…when you’re older.

If you have one of these policies or know someone who might have one (your parents maybe?), advise them to find an alternative asap.

The government is investigating these policies to assess whether there needs to be a law change to protect customers.

Here’s how they work

• After you take out a policy, the insurer reviews the premium every 10 years but doesn’t usually increase the premium, thus lulling you into a fall sense of security.
• However, that’s where the good news ends. Once you hit 60, the insurer reviews your premiums every year.
• Your insurer can (and usually will) increase your premium at each review, and I don’t mean by a couple of euros. Increases of 400% are common.
• The policy becomes so expensive that you eventually cancel.
• The insurance company pockets the premiums you paid all your life, and you’re left with nothing.

Here’s a more detailed article we wrote on the reviewable whole of life insurance.

Now let’s look at a much fairer type of whole of life insurance:

2. Guaranteed Whole Of Life Insurance – Tasty

This is the one we have always recommended.

It’s fair because you know exactly how much will pay out and how much it will cost every month.

No nasty surprises, and no one has yet found a way to outlive the policy.

Taking out a guaranteed whole of life policy is the only way to beat the house.

• No reviews. Your price is fixed from the start of your policy.
• There is no end date on your policy, i.e. it’s for the whole of your life.
• Premiums are payable as long as you live.
• It can payout tax-free to fund your inheritance tax liability.
• Commonly used to pay funeral expenses or leave a gift.

But now, the moment you’ve been waiting for, the newest type of whole of life cover:

3. Life insurance with Whole of Life Benefit – Delicious

This one is a mixture of an ordinary term life insurance policy and a whole life insurance policy.

Let’s look at a policy I recently arranged:

Susan contacted me looking for €100,000 life insurance over 20 years for herself and her husband. However, she wanted to make sure she wasn’t paying, forgive the pun, dead money. Susan wanted to get something back from her policy. We looked at life insurance with cash back, but that was outside her budget. Instead, we settled on life insurance with the whole of life benefit.

This is Susan’s story:

• Female, 42, Non-Smoker
• 20-year term life cover of €75,000, whole of life cover €25,000
• Male, 47, Non-Smoker
• 20-year term life cover of €75,000, whole of life cover €25,000
• Monthly premium – €91.95

The total cost of this policy over the 20 years amounts to €22,068 (€91.95 x 12 x 20)

But there is a guaranteed payout on each life of €25,000.

Let me repeat that.

The most Susan will pay in is €22,068. The minimum this policy will payout is €50,000

The policy also has a medical-free conversion option.

For the final time, for those of you down the back, for a benefit that will cost a maximum of €22,068 over 20 years, this is what could happen.

Scenario A:

Either Susan or her hubby dies within the 20-year term
€75,000 Life cover + €25,000 whole of life benefit pays out = €100,000 per person. If both die within 20 years, €200,000 pays out.

Scenario B:

Both survive past 2038, the life cover of €75,000 no longer applies, but the whole of life benefit of €25,000 continues on Susan and her husband for free. On their eventual deaths, €50,000 will payout (€25,000 for Susan and €25,000 for her hubby)

Ok, one last time – the maximum they will pay in is €22,068, but if they keep the policy for the 20 years, it will pay out a minimum of €50,000.

Free life insurance when you retire

So, where’s the catch for you?

There’s only one.

You have to stick with this insurer and pay the premiums for the term of your policy.

That’s it.

But remember:

From the first second the insurer gets your money, they will invest it. They hope their investment return beats the return they have to provide on your life cover. They also hope many of you will cancel the policy before the free cover kicks in. And finally, inflation over those 20 years should make the payout at the end easier to swallow.

Still, even taking all of this into account, it’s an attractive product provided you structure it the right way.

And that’s where I come in.

So, where’s the catch for the bank?

Wondering how the life insurance provider can make money if it pays out more than you pay in?

You’re dead right!

Well, three things spring to mind:

1. Lapses (cancellation due to non-payment)

If you don’t keep the policy for the full 20 years, the insurer will cancel your policy and pocket the premiums.

2. Eroding effects of inflation

The €100,000 payout in 20 years will be worth less than €100,000 but seeing as we’re in a low inflation cycle will be for a while, such cover still makes financial sense.

3. Investment of premiums

The insurer will invest your premiums as they receive them over the years of your plan. These investments should generate more revenue than they will eventually payout.

Over to you…

Let’s rewind to your pet hates when it comes to life insurance:

• Cost

Not if you structure it like Susan. In fact, it pays for itself.

• Losing all your money if you outlive the policy

Not if you add the whole of life benefit, you can’t outlive it.

I know it’s hard to get your head around, so I’d be only too delirah and excirah to go through it with you in more detail and answer any questions.

Complete this questionnaire, and I’ll be right back with a recommendation we can discuss.

Or you can schedule a call here to go through it.

Chat then!

Nick McGowan
lion.ie | making life insurance easier