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Whole of Life Insurance That Pays For Itself

December 5 2018 5 min read Life Insurance

 

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

Bad manners

Queuing

Smelly people

All of the above are pet-hates of mine so if I’m ever queuing and Mr Stinky rudely pushes by, I’m like

 

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

Well, let me tells ya.

Your pet hates when it comes to life insurance are

  • it costs too much
  • you get nothing if you don’t die during the term of your plan

I know that every month your direct debit comes out, you may feel like chasing me around the house with an angry hairbrush.

But before you brush me to death, I may have a solution  – life insurance that pays for itself…and pays out regardless of when you die

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 have heard of.

1. Reviewable Whole Of Life Insurance

This type of cover basically sucks. It’s designed to get so expensive you eventually cancel and leave yourself exposed at the exact time you need it most…when you’re old and more likely to die. If you have one of these policies or know someone who might be, do the decent thing and give them my number puh-lease.

Even the Irish Times agrees

Here’s how they work

  • Reviewed by the insurer every 10 years and then every year, once you hit your 60th birthday.
  • At each review your insurer can (and usually does) increase your premium.
  • These policies are designed to become so expensive that you eventually cancel.
  • The insurance company pockets your premiums, you get nowt..

Here’s a more detailed article we wrote on reviewable whole of life insurance. (from way back in 2013!)

Now let’s look at reviewable whole of life’s much fairer (and prettier) sister, I give you:

2. Guaranteed Whole Of Life Insurance

This is the one we have always recommended. It’s fair because you know exactly what will pay out and you know exactly how much it will cost every month. No nasty surprises and no 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 pay inheritance tax.
  • Commonly used to pay funeral expenses or leave a gift.

But there’s also a third kind of whole life insurance:

3. Life insurance with Whole of Life Benefit

This one is a mixture of an ordinary 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 but 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 years 1 months  Non-Smoker, life cover €75,000, whole of life cover €25,000
  • Male, 47 years 4 months , Non-Smoker, life cover €75,000, whole of life cover €25,000
  • 20 year term
  • 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 whole of life 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 hubbie 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 pay out (€25,000 for Susan and €25,000 for her hubbie)

In a nutshell – 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 is another valuable additional benefit –  you stop paying for cover when your income drops.
It’ll be harder to afford life cover once you retire, yet this is the time you need it most as you’re, how can I say it, getting closer to the grave.
With the whole of life continuation option, you can structure it so you stop paying for cover at the time your income comes under pressure.

So where’s the catch?

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

Don’t fret about how they can afford to do this.

From the first second they receive your premium they will reinvest 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 if you structure it the right way. If Susan, above, had bought a 15 year term instead of a 20 year term, the results wouldn’t have been impressive.

Over to you…

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

  • it costs too much

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

  • you get nothing if you don’t die during the term of your plan

Not if you add whole of life benefit, it’s guaranteed to pay out whenever you shuffle off this mortal coil.

QED 🙂

If you’re considering life insurance to cover funeral expenses or death expenses then this is an option you must give serious consideration to.

And 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.

Call me on 05793 20836, email nick@lion.ie or complete the short form below and I’ll be right back.

Nick McGowan
lion.ie | making life insurance easier

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