Whole of life assurance

Protection

Whole of life assurance

Whole of life assurance policies will provide a lump sum on death, whenever it occurs. Although the prime purpose is to provide life cover, this type of policy also normally offers the potential for an investment return in later years once a surrender value has been established. In both cases, policies should normally be written under trust to ensure that the proceeds do not form part of the deceased’s estate.

Permanent Health Insurance

Permanent Health Insurance (PHI) is also known as Income Protection Insurance (IPI). Its purpose is to provide financial protection for an individual and his or her family in the event of long-term disability or incapacity due to accident or illness. The monthly income will normally come into payment after a deferred or waiting period has elapsed following the start of incapacity. The income will normally be paid until the individual recovers sufficiently to resume work, retires or dies (whichever comes first).

Typically, the maximum level of income cover that an insurer is prepared to provide is up to 50% of an individual’s income less any State Incapacity Benefit that would normally be payable. This restriction provides a financial incentive for the policyholders to go back to work, if possible. The definition of incapacity for the purposes of this form of insurance differs from one insurance company to another. The income benefit is free of tax, as long as the individual insured has paid the premiums. If an employer pays the premiums, then the benefit is immediately treated as taxable income.