Your Personal Finance Questions – Should I cash out my life insurance coverage because its cash value has fallen?
Q I am 74 years old and I pay € 198 per month in a unit life insurance contract worth € 157,000 in the event of death or disability (non-indexed). I have seen the cash value drop from € 21,000 to € 9,000 now. Should I cash it in or continue to pay the monthly installments?
A It appears the policy you have is called a unit-linked whole life insurance policy, said Richard Jones of Aviva Life and Pensions. This means that the policy will pay (assuming the required premiums continue to be paid) for the full amount of € 157,000 upon your death.
This type of policy is generally more expensive than other term life insurance policies available because of the guaranteed payout on death. However, you may find that this policy may be subject to what is called a policy review.
This means that premium increases may be necessary to maintain the level of benefits at € 157,000. In response to your question of whether or not to cash in, there are a number of factors you need to consider, such as your overall financial situation, age and health, Mr Jones said.
The value of your policy may have fallen due to a number of factors, including the type of fund you invest in, the return received on that fund and the level of fees associated with your policy, Jones said.
Based on that, he would recommend that you speak to an independent financial broker who can perform a full financial health check with you and explain the options available to you.
Q I recently read that the Irish Credit Bureau is planning to cease operations by the end of the year. Is it true? Will this mean my credit history will be deleted?
A You are correct that the Irish Credit Bureau (ICB) recently announced its intention to cease operations by the end of the year. However, that doesn’t mean your personal credit history will disappear, according to Frank Conway, founder of financial wellness provider MoneyWhizz and qualified financial advisor.
Indeed, the ICB has not been the sole provider of personal credit information in Ireland for several years now. In addition to the ICB, there is also the Central Credit Register, or CCR for short. The CCR was established several years ago and has become the primary credit assessment authority for the use of personal credit.
Today, it is the main place of choice for lenders to check the creditworthiness of those applying for credit. Thus, your personal credit history will continue to be accessible through CCR.
If you have a loan, mortgage, PCP (personal contract plan), or even a small business loan, this will continue to be flagged and made available for what the industry calls an “authorized end.”
In other words, whether or not you are a good credit risk. Also, keep in mind that currently you can request a copy of your personal credit history if you want to view it, Mr Conway said. In addition, you can receive this free copy per year. This can be a useful exercise in ensuring that what is being reported about you is accurate.
Q My four siblings and I inherited the house from my mother when she passed away in 2017. At that time, the house was valued at € 260,000. When we sold it two years later, it sold for € 275,000. Do we have to pay tax on the difference between 260,000 € and 275,000 € and if so how do we pay this individually?
A According to lawyer Susan Murphy of MakeMyWill.ie, a capital gains tax (CGT) can arise when you and your siblings earned € 15,000 when you inherited the house.
You can, however, deduct any expenses you may have incurred, such as legal and auctioneer fees for the sale, she said. The first 1,270 € of your share of the taxable capital gain are also exempt from CGT. The rest is taxed at 33pc.
You can each file your CGT returns separately on Revenue.ie, but keep in mind that if the property was sold in 2019 you may have to pay a late penalty and interest.
Q I have three defined contribution retirement accounts, what should I do?
A If the amounts are small, for example, if you have withdrawn your tax-exempt lump sum of 25 pc and the combined value was less than € 20,000, it might be possible to take the remaining amount in cash and not pay. than 10% of tax, explains Mr. Conway of MoneyWhizz.