Whole of Life Cover- FAQs

What is Whole of Life Insurance?

This product does exactly what it says on the tin, essentially it is life cover for the rest of your life. ?As long as you keep paying your premiums, the life company will pay out a lump sum to your family (or estate) when you die.

Who needs Whole of Life Cover?

People take out Whole of Life cover for different reasons. Some people like the peace of mind knowing that their loved ones have been taken care of financially when they’re gone, while others might set it up to take care of funeral costs or any debts and liabilities they may have left behind. However, one of the most significant benefits of a Whole of Life policy is that it can help pay inheritance tax liabilities for your children / estate. This can be done by setting up what is known as a ‘Section 72’ life insurance policy. This policy is taken out specifically to help pay inheritance tax so that you can protect your loved ones by helping them offset or reduce their inheritance tax liability. ???

Let’s look at an example. A couple pass away and leave an estate worth €500k to their only child. Under current rules, children can inherit €335,000 tax free from their parents and anything over that amount is taxed at 33%. In this case, the child would need to pay inheritance tax on €165k (€500k - €335k). Their tax liability would be €54,450 (€165k x 33%). If the parents had taken out a Section 72 policy that covers at least €54,450, then the lump sum paid out on their death is used to pay their inheritance tax liabilities.

How much cover do I need?

This really all depends on your own personal circumstances. Some of the key things for you to consider when thinking about how much cover you might need is;

-?????????Could there be an inheritance tax liability for your loved ones?

-?????????Do you want to pay funeral costs from the policy proceeds?

-?????????Do you have debts or loans that need to be settled?

-?????????Do you want to leave money for your family to use to meet ongoing expenses?

How much does Whole of Life cost?

The premiums will more than likely be higher than regular Term Assurance (life cover with a specified term) as the Whole of Life policy covers you for your entire life as opposed to a set period and therefore it is guaranteed to pay out. The premiums are set at the outset of the policy i.e., they do not increase for the life of the policy*. The life company will also look at several different factors when determining your premium including;

-?????????Age

-?????????The amount of cover you choose

-?????????Smoker status

-?????????Your health

-?????????Your occupation and pastimes

-?????????Whether you choose to add additional features to the policy such as indexation

One particular Life Company has what is called a LifeChanges option which is an excellent and flexible additional feature. Essentially, if you stop paying premiums at any time after you have had the policy for at least 15 years, you can choose between two options.

1.???????You can have a lower amount paid out when you die.

2.??????Or you can take an immediate cashback amount (70% of the premiums paid) and end the policy.

If you’ve any questions on Whole of Life cover, you can get in touch with ourselves at [email protected].