Too much life assurance ?

[zag]

Is there such a thing as too much life assurance ?

I know with pensions it is theoretically possible to be over-funded such that when you go to retire you can't take the entire value of the fund because it is more than X% of your final salary (or something along those lines)

If someone has a life assurance policy associated with their mortgage, another one provided by their employer, and another one they took out before the first two came up, is it possible that in the event of their death their estate may not be able to benefit from the full value ?

Just wondering.

z

 

[CCOVICH]

Hi Zag.


With regard to life assurance, there is nothing to stop your estate benefitting from the full value of your personal life assurance and any policy associated with your mortgage. There may be inheritance tax issues for your dependents, but that is a separate matter.

With regard to life assurance provided by your employer, the amount of beneift that can be taken as cash is capped at four times salary. The remainder of the policy value must be taken as a pension/annuity, which will be treated as income for tax purposes (i.e. your dependents will pay tax at their marginal rate).

So in theory, you are not prevented from having 'too much' life assurance, other than the tax issues surrounding the life assurance provided by your employer. Having said that, most underwriters would impose a limit on the amount of cover you can actually have in place, so actually getting cover could be the problem, or it will be capped.

The limit to the amount of pension you can receive from company scheme is 2/3 of salary. Any excess must be returned to the company, or is taxable if taken by the employee.

Their are no such restrictions on personal pensions or PRSAs, but the amount of tax relief on your contributions is capped at various limits depending on your age.

I'm no expert on pensions, so the last two paragraphs may have a couple of holes in them, but I haven't the time or energy to fill them in!

Hope this answers your question.

 

[Guest127]

I personally think you can have too much live cover. (either that or you have too much spare cash.) Insurance companies are in business to make money. and pretty successful they are too. I have medical insurance, which I hope never to use, car insurance ( ditto) house insurance ( ditto) and life insurance. I always had cover, probably inadaquate, in the event that I kicked the preverbial bucket before the terrible two leave home but as one is now 22 and the other is 18 and I am on a 9-5 job I dont feel the need to overdo the insurance so that they can live like kings. In fact only a few days ago my other half mentioned
to the 22 year old that we had a joint lift policy which paid on the first death and provided it was kept in force also pays on the second death and that in the event of one of us going underground that it would be in 'their' interest to keep up the policy as they would be the beneficiaries in the event of the 2nd death. To which the 22 year old replied ' Do you hear that xxxx ( to the 18 year old) you will have to pay your share if you want any of the money'
says it all.