Life assurance that continues when you stop paying premiums….

I wrote a piece last year about “Whole of Life Assurance”. There are different benefits available, but the maturity of two of my clients’ policies prompted me to write about it this month.

Both sets of clients took the policies out circa 12 years ago, but one client recently phoned me to ask “do we really continue to have life assurance now that we have finished paying the premium?”. It sounded too good to be true to him and I was able to say, “yes you do”.

So, what was the policy? Our clients were aged 54 and 57 when they set up this plan originally (they are now 66 and 69). The cost of the policy was €202 per month at the time with a term of 12 years. The total premiums they have paid during this term is €29,142.

During the 12-year term of the plan, they each had €50,000 life cover. Now that the term is complete, they stop paying the premium, but they both continue to have €25,000 life cover each for the rest of their lives. In short, these policies will now cover any future funeral expenses and they will not have to put other funds aside to cover this situation. They just keep the policy documents somewhere safe until needed.

This is a really popular life assurance plan for people to use, particularly to pay for while in employment and be able to just put it aside at retirement knowing you are covered. Many people wonder how or why would a life company offer such a deal? Premiums of €29,142 for €50,000 guaranteed life cover?

There are two major factors as to why life companies can offer such a deal. One is that there is a significant amount of people who will cancel the policy before the term is up. Once you take out a plan like this you really should try to complete the term on the plan. The second reason is because the company has already factored in that most of us will live to our mid 80s and at that stage inflation will have reduced the actual cost for them to pay out the claim.

I have been receiving more queries about different types of life cover, but these policies maturing gave me great satisfaction to see my clients very happy with the outcome. I know some people say “life cover is dead money” for different reasons, particularly as most life cover policies require you to keep paying premiums until you die. This policy is a good alternative to consider.