The primary benefit of Life Assurance is to financially protect a family in the event of a death. When deciding if you need Life Assurance the kind of questions you should consider:
How will my family adjust financially if my partner or I die?
Will my mortgage be paid off?
Will my loans be paid off?
What sort of lifestyle will I be able to maintain?
Have I appropriate provisions in place long term?
Would I be able to afford to not work for a period of time?
In most cases, Life Assurance has a set amount of Life cover and a set time period. The average Life Assurance policy is cancelled within 8 years which means that many people will be taking out a new policy and will not receive any benefits from their current plan. There is generally no value on these policies unless you are making a claim.
A Life Assurance company has recently introduced a Whole of Life cover that offers you several options once you have passed 16 years. Once you have paid into it for this term, every year thereafter you will have an option to continue paying, encash the policy (receiving 70% of your premiums back) or stop paying for the cover and you will maintain a specified amount of Life cover forever.
Here is an example for a person who is 45 years of age, a non smoker who takes out €100,000 Whole of Life cover. The cost of this would be €111.66 per month (half the cover would cost roughly half the price). Let’s imagine they are retiring at 65 years of age, so they have paid into this plan for 20 years at that stage but they want to know what options they have at that time:
Change Nothing: They can continue paying this policy. The premium will always be €111.66 and the Life cover will remain at €100,000 while they continue payments.
Guaranteed Life Cover €35,023: They can cease paying the €111.66 per month premium. They would be told at that time that they will have €35,023 Guaranteed Life assurance for the remainder of their life.
Guaranteed Cashback €17,644: They can cease paying the €111.66 per month premium. They would be entitled to encash the policy for a guaranteed €17,644. There would be no further cover from this policy.
Unlike some of the older whole of life “with savings/encashment” benefits, these are not investment policies. The figures are guaranteed and you can see the different options available from year 16 onwards (every year you pay beyond year 16 increases the offer available). If the policy is cancelled before 16 years, then the above options are not available.