This week we are discussing a relatively new concept called Life Insurance with a Whole of Life Continuation Benefit.
This structure in our opinion is a significant shift in the way we think about Life Insurance and hence should trigger a review of your Life Insurance arrangements.
The majority of Life Insurance policies that people have in place are called Term Assurance policies. With these policies you pay a certain premium for a specified level of cover for a specific length of time. If Death occurs within the term you are paying premiums for, the Life Insurance benefit is paid out.
If Death does not occur the Life Insurance is not paid out, the Life Insurance Company keeps the premiums and your policy ends. Is there a better option? We believe there is.
Tell me about Life Insurance with a Whole of Life Continuation Benefit
Under this structure you a covered for two benefits a) Life Insurance for a Specified Term b) Whole of Life Continuation Benefit. The real key is that you only pay the premium on the policy for the Specified Term.
Then the premium payment stops but the Whole of Life continuation benefit continues and pays out a Lump Sum amount on death whenever it occurs. In many instances this can provide you with a benefit which could be more than the total premiums paid in on death. Lets look at a worked example
In this example if Claire died within the 20 year term a Death Benefit of €230,000 would be paid. If Claire did not die, over the 20 year term Claire would have paid in €17,477 into the policy. After 20 years her premiums would stop, however there would still be a minimum guaranteed pay-out of €30,000 under the Whole of Life Continuation Benefit whenever her Death occurs.
What are the Key Benefits of Structuring your Life Cover in this way?
- There is a Guaranteed Minimum Pay-out on Death. A Lump Sum amount is paid out whenever death occurs.
- It is a benefit that can pay for itself and it can go further and pay for the policy altogether
- It offers you more security and confidence that in the event of death, the Whole of Life benefit will still be paid out even after the term of cover has ceased for other benefits
- You only pay for cover for a set period of time, perhaps when you are working and able to afford it most.
- The Whole of Life Benefit can pay for funeral expenses
- You can choose to index the policy which means that the Whole of Life Benefit will continue to increase at 3% per annum even after all of the premiums have been paid.
You should consider this cover if you would like a definite pay-out on death (no matter when that occurs).
So what do you do next?
To find out further information about this and to work through your specific numbers please contact me, David Peavoy on 087-2902206 or alternatively by email on david@peavoyfinancial.ie
David Peavoy BA, QFA, LIAP is the Owner of Peavoy Financial Planning whose practice is based in Office 5b, Portlaoise Enterprise Centre, Clonminam Business Park, Portlaoise, Co Laois.
David Peavoy T/A Peavoy Financial Planning is regulated by the Central Bank of Ireland
Disclaimer: All data and information provided within this blog is for information purposes only. It should not be taken as specific advice for your situation. Peavoy Financial Planning makes no representations as to the accuracy. completeness, or suitability of any information and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its use
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