Life cover pays a lump sum to your family or personal representatives when you die. They can use this lump sum to:
- help pay for any inheritance tax bills,
- help pay off bills or the mortgage,
- help cover funeral expenses; and
- give your dependants an income when they need it most.
You should be aware that there are different types of life cover plans available.
Some may be more suitable for specific purposes than others.
For example, decreasing cover generally protects your mortgage if you die or term life cover provides life cover for a certain term only. If you feel that one of these types of products would be more suited to your needs, please speak to your financial adviser about the range of alternative plans available at present.
Why do I need life cover?
It is important to protect your family’s lifestyle if you die.
State benefits are limited, and because the regular bills will still be rolling in, your family could suffer financial hardship if you die.
Life Long Insurance
This type of plan can give you the peace of mind that, when you die, your family could be protected from any possible inheritance tax liability or it could provide a lump sum to help them financially after you are gone.
Life Long Insurance is a simple straightforward plan, guaranteed throughout your life. This means that the plan will provide the level of life cover you choose for your whole life, as long as you continue making your regular payments. The cost of the plan reflects this. If you only need life cover for a certain period, perhaps a term insurance product may be more suitable for you. Please speak to your financial adviser about the range of plans available at present.
Life Long Insurance offers you guaranteed cover against the following incidents which could affect your family’s future income.
- Death
- Terminal illness (see note below)
- Accidental death
- Children’s death (see note below)
Please Note
- This is not available if you are using Life Long Insurance to plan for inheritance tax as these benefits could affect the plan’s eligibility for inheritance tax relief Section-72.
- If you do not plan ahead, your family could be faced with a difficult decision between having to sell part of their inheritance and/or having to borrow money to pay the resulting tax bill. If your family is likely to have to pay inheritance tax when you die, it is a good idea to protect them against this beforehand. This plan provides a tax-efficient solution to the inheritance tax your beneficiaries’ may have to pay.
- Life Long Insurance offers you the security that your benefits and regular payments will stay the same over the course of your life. This does not apply if you choose inflation protection.
The amount you will pay depends on:
- your age;
- your health;
- whether you smoke; and
- how much protection you want, or the value of the assets you are making inheritance tax provisions for.
How much life cover do I need?
If you take out a Life Long Insurance plan, the level of life cover you need will depend on your circumstances, how much cover you already have, and whether you need cover for the whole of your life. If you need it only for a set term, a term product may be cheaper and more suitable for you.
When you are considering the cover you need, you should take account of:
- any other loans and bills;
- the income your family will need to live on;
- any funeral expenses; and
- any inheritance tax that may arise.
What happens if I miss or stop making payments?
If you stop making payments, your plan will also stop and you are no longer covered for life cover.
If you take this plan out to qualify for Section-72 inheritance tax relief, you must continue to make your regular payments and you must make them on time. If you stop making regular payments, you cannot restart the plan and your plan may no longer qualify for Section-72 relief.
Who can apply for Life Long Insurance?
You can apply if you are aged between 18 and 74 and you are living in the Republic of Ireland.
What if I want to change the level of cover and the amount I pay?
This is usually not possible. You would need to talk to your financial adviser in this circumstance.
Life Long Insurance could be suitable if you:
- want a guaranteed protection plan for life with payments that don’t change –unless you choose the indexation option;
- have assets you want to protect against inheritance tax;
- want cover for the rest of your life (because cover is for your whole life, you may pay more for this cover and must continue to make payments even after you retire);
- only need life cover benefits; and
- are aged between 18 and 74.
Life Long Insurance may not be suitable if you:
- are looking for flexible payments and the possibility to change your cover in the future;
- do not need to plan for inheritance tax;
- are looking for a plan with a cash-in value;
- want additional benefits on your plan for example, specified illness cover;
- are looking for a plan that provides cover for a set term or to cover your mortgage (you would prefer to make payments over a shorter period and because it is for a set term, you should pay less for this); and
- are not aged between 18 and 74.
Life Long Insurance – your benefits explained
Life Long Insurance provides different types of life cover. The one which applies to you will be shown in your provider’s policy schedule.
- Single cover – this means that the plan covers one person and we will pay out the life cover once, when that person dies.
- Dual cover- this means that both lives are covered individually. We will pay out when either of the people die. The plan will continue with full cover on the other person as long as they continue to make payments.
- Joint life, first death – this means that both lives are covered. We will pay out once, when either you or your partner die, whichever death is first. The plan will then end.
- Joint life, second death – this means we will pay the life cover when the second of the lives covered dies. After the first death of the two lives covered, payments must continue, and we will not pay any benefit.
There is usually an early payment option if you are diagnosed with a terminal illness.
If you are diagnosed as having a terminal illness, we will pay you your benefit straight away. A terminal illness is a condition that, in the opinion of the appropriate hospital consultant and our chief medical officer, is highly likely to lead to your death within 12 months.
However, if you take out this plan on a ‘joint life, second death’ basis, the terminal illness benefit applies when the first person has died, and the second person becomes terminally ill.
Please Note
This is not available if you are using Life Long Insurance to plan for inheritance tax because these benefits could affect the plan’s eligibility for relief from inheritance tax (section-72).
Accidental death benefit
This is a temporary automatic benefit available while you are in the process of taking out life cover. Death benefit will be paid (usually up to €150,000) if you die as a result of an accident.
This benefit is only applicable if you are younger than age 65. Accidental Death means death caused solely and directly as a result of an accident caused by violent, visible and external means and independently of any other cause. If you take this plan out on a joint-life second-death basis, the accidental death benefit applies for the second death only.
Guaranteed insurability
If you take out Life Long Insurance and you then get married or become a registered civil partner, have a child, or the amount of inheritance tax your family would have to pay increases before age 65, you can ask to set up a new life cover plan for €100,000 (or half of your original benefit, whichever is lower) without having to provide any information about your health. Please speak to your financial adviser regarding options available in your plan.
Children’s life cover
If you take out Life Long Insurance, some plans automatically cover each of your children under 21 for €6,000 life cover for as long as you are covered. During the first six months, cover may only be available for them for accidental death. There may only be one claim per child regardless of how many plans you have with your provider.
Please Note: This is not available if you are using Life Long Insurance to plan for inheritance tax as these benefits could affect the plan’s eligibility for inheritance tax relief (Section 72).
Optional benefit: Inflation Protection (Indexation)
This option allows you to increase your cover every year (to keep in line with the cost of living). And, you do not have to provide evidence of your health. This is often called ‘indexation’.
Why do I need inflation protection?
This option protects the real value of your cover as time passes. If you do not take this option, your cover will stay the same throughout the term of your plan.
How inflation protection works:
- You will have to pay an extra charge for this benefit. This extra charge will depend on your age and how long you take your plan out for.
- At the moment the amount you are covered for will increase by 5% a year. Your payment will go up by 8% each year, on your policy anniversary, to reflect the extra cover and the fact that you are older.
- If you refuse this option two years in a row, we will not offer you any further increases.
- If chosen, indexation will stop at age 75 or in the case of a joint/dual life case when the oldest life reaches age 75.
Making a claim
If you die and your personal representatives (usually your family, but your personal representatives refers to anyone named in your will) need to make a claim, they should contact your financial adviser who will organise a claim form.
A filled-in claim form will always be required, the plan schedule, and the original death certificate. In some circumstances, a certified copy of the will and grant of probate will be required If there is no will, letters of administration me be needed.
When all the documents and information is received, payment will normally be made within five working days.
Situations where a claim may not be paid
A claim may be refused if you have given incorrect information or did not state something that would have affected the assessment of your application when you first took out the plan. You must state, on your application form, everything relevant about your health, occupation, hobbies and pastimes. If you do not and you make a claim, you may not be paid your benefit. A medical information summary will usually be included in your application form. You should check this to make sure that you have answered all the health questions accurately.
Life cover benefit may not be paid if your death is caused by suicide, or being executed in a foreign country, within a year of the plan starting.
Accidental death benefit and terminal illness claims may only be paid if you were living in the European Union, Australia, Canada, New Zealand, Norway, South Africa, Switzerland or the United States of America. If you move outside of these countries, you must let your financial adviser know immediately so that a decision can be made whether your benefits should continue.
Benefit may not be paid if the accidental death is caused by you taking part in any of the following activities. Abseiling, bobsleighing, boxing, caving, flying (except as a paying passenger on a public airline), hang-gliding, horse racing, motor-car and motor-cycle racing or sports, mountaineering, parachuting, potholing, powerboat racing, rock climbing or scuba diving.
Will any tax have to be paid on the benefits?
Usually tax does not have to be paid on life cover benefits but in some circumstances tax may have to be paid on life cover. For example, when you die, the life cover is paid to your estate and may be seen as another taxable inheritance and added to the total tax bill. This means your beneficiaries may have to pay inheritance tax on the proceeds from the plan (See Section on Capital Acquisitions Tax). Please seek advice from your financial adviser as to what options are in your plan.