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Whole of Life Insurance That Pays For Itself

December 11 2019 5 min read Life Insurance

 

life insurance that pays for itself text on image of gent making payment

Bad manners

Queuing

People who refuse to use deodorant (like why?)

All are bugbears of mine so if I’m ever stuck in a queue and Johnny Stinkface rudely pushes by, I’m like

 

So what does a 4-year-old with a questionable haircut have to do with life insurance I hear you ask?

Well, let me tells ya.

Your life insurance bugbears are:

  1. Cost
  2. Losing all your money if you outlive the policy

Fear not, I have the solution – life insurance that can pay for itself, and will pay out whenever you shuffle off this mortal coil.

I kid you not!

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 already know about.

1. Reviewable Whole Of Life Insurance

This type of cover is shit.

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 change in the law 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.
  • At each review, your insurer can (and usually does) increase your premium, 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 reviewable whole of life insurance.

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

2. Guaranteed Whole Of Life Insurance

This is the one we have always recommended.

It’s fair because you know exactly how much will payout and you 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.
  • Can be paid out 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

This one is a mixture of an ordinary term life insurance policy and a whole of 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 cashback but that was outside her budget. Instead, we settled on life insurance with 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 the 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

There’s another valuable additional benefit –  you can set this up so the free cover kicks in when you reach retirement. On retirement your income will reduce so you’ll want your outgoings to be as small as possible. With the whole of life continuation option, you can structure your policy so you stop paying for cover at the exact time you need to.

So where’s the catch?

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 a lot of you will cancel the policy before you get to the end of the term. And finally, inflation over those 20 years should make the payout at the end easier to swallow.

Still though, 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.

Over to you…

Let’s rewind back 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 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.

Nick McGowan
lion.ie | making life insurance easier

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