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Types of Life Assurance Cover
Term Life Cover
A term life insurance policy has 3 main components:
- Amount of cover, sometimes known as the death benefit.
- Premium to be paid which is the cost to the cover, and
- Length of cover known as the term. The policy expires at the end of the term. If the insured person dies during the term of the policy, the beneficiary is paid the amount covered. If the insured person is alive after the term of the policy, no benefit is paid and the policy expires. The maximum term is 40 years.
Guaranteed Mortgage Protection
A Life Assurance policy designed to pay off your mortgage in the event of your death. The amount of cover normally decreases over the term of the plan broadly in line with the amount outstanding on your mortgage. Because the amount of cover reduces over the term the cost of this type of cover is less than a normal term life cover policy (e.g. Cover for mortgage of €100k will reduce over the term of the mortgage in line with capital outstanding).
Pension Term Assurance
Pension Term Assurance provides a lump sum payment if the insured dies before retirement. Under current legislation tax relief is available on pension term premiums at your marginal rate of income tax, as for pension contributions. The maximum term is until you reach retirement age, normally be your 65th birthday (but it may be earlier) subject to revenue conditions. These types of policies are subject to additional restrictions.
Guaranteed Whole of Life Assurance
As the name suggests this is life cover that lasts for a whole lifetime and not just a specific term, as long as the premiums continue to be paid. This type of cover is normally taken out to pay inheritance tax bills arising on the transfer of assets on your death to your loved ones.
Business Protection including “Keyman”
This is Life Assurance taken out on the life of persons who are key to the operations of your business. The business owns the policy and the purpose is to minimise the impact that the death of one of these persons would have on the business.