Don’t buy life insurance until you read this. Low Cost Life Cover. ie tackles common life insurance misconceptions and reveals a trick to avoid tax on pay-outs.
Myth 1: Your life insurance premiums will increase if you develop a serious illness
Your life insurance premiums are based on your health (among other factors) at the time you take out your policy. This means if you are unfortunate enough to develop a medical condition during your policy, providing you were honest and accurate at the time you applied for your life insurance, your premiums won’t be affected on your existing insurance policy.
Myth 2: Life insurance does not pay out for suicide
Whether a policy pays out in the case of suicide differs between insurers. However, generally speaking suicide is covered after the policy has been in force for at least one year, but individual policies may vary.
Myth 3: I should tell my insurer if I start smoking or put on weight
Typically, you do not need to tell your insurer if you start smoking. As your premiums are based on your lifestyle at the time you have taken out the policy, generally you will not need to inform your insurer of unforeseen changes, such as starting to smoke or putting on weight.
That said if you have made positive lifestyle changes to your health, such as quitting smoking some insurers may actually lower your premium. If they will not, and you have given up smoking for 12 months or more, you could consider shopping around for a new policy so that your premium can be calculated as a non-smoker. Always make sure you have appropriate cover in place before cancelling your old policy though.
While it’s unlikely an insurer will drop your premiums if you lose weight or get generally fitter, it could be worth shopping around for a new policy with a cover level and monthly premium that reflects the new fitter you.
Myth 4: The tax man gets most of a life insurance pay-out
Not necessarily. A joint or dual life policy will pay directly to the other person named on the policy. If they are married there is no tax issues. However if they are not married then the Life Insurance pay-out may be subject to tax. Have a look at this blog post which covers co-habiting couples www.lowcostlifecover.ie/mortgage-protection-for-cohabiting-couples/
There are ways around unmarried couple paying tax on Life Insurance pay-outs so its best to discuss your individual needs before taking out a policy.