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Life of Another

A Life of Another policy is a type of life insurance where the policyholder insures the life of someone else. If the insured person passes away, the policyholder receives the payout. This type of policy is common in personal relationships or business partnerships where one party has a financial interest in the other person’s life.

How It Works:

  1. Parties Involved:
    • Policyholder: The person who owns the policy and pays the premiums.
    • Insured Person: The person whose life is being insured.
    • Beneficiary: Typically, the policyholder is also the beneficiary, meaning they receive the payout upon the insured person’s death.
  2. Insurable Interest:
    • To take out a Life of Another policy, the policyholder must prove they have a valid financial or emotional dependency on the insured person. Examples include:
      • A spouse or partner relying on the insured’s income.
      • A business partner depending on the insured for business continuity.
      • A parent insuring an adult child (e.g., to cover debts or loans).
  3. Policy Payout:
    • If the insured person dies, the policyholder receives the death benefit. This money can be used to:
      • Cover lost income.
      • Pay off shared debts (e.g., mortgages or loans).
      • Support dependents or fund business operations.
  4. Premium Payments:
    • The policyholder pays the premiums, and the cost is based on factors like the insured person’s age, health, lifestyle, and the level of cover chosen.

Examples of Use:

  1. Personal Use:
    A couple takes out Life of Another policies on each other. If one partner passes away, the other receives the payout to cover expenses like mortgages or childcare.
  2. Business Use:
    Two business partners insure each other’s lives. If one dies, the payout can fund the buyout of the deceased partner’s share or maintain cash flow for the business.

Important Considerations:

  • Consent: The insured person must provide consent for the policy.
  • Policy Ownership: The policyholder has full control over the policy, including any changes or cancellations.
  • Tax Implications: Death benefits are usually tax-free in Ireland, but it’s essential to consult a tax advisor for specific situations.
  • Review of Needs: As circumstances change, it’s important to review whether the policy still meets your needs (e.g., if debts are paid off or financial dependence decreases).

Benefits of a Life of Another Policy:

  • Provides financial security for dependents or business continuity.
  • Helps manage shared liabilities, such as mortgages or loans.
  • Offers peace of mind knowing that financial responsibilities will be covered.

If you’d like help determining whether a Life of Another policy suits your situation, let us know! 😊

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