A Guide To Life Insurance
Everything You Need To Know
As life insurance is such a broad subject, there can be some terms that can be downright confusing. To help you make more informed decisions, we’ve looked at the most popular life insurance policies that are available to you and your family, as well as a comprehensive guide to everything you need to know to make the choice easier.
WHAT IS LIFE INSURANCE?
Life insurance is the answer to a question you might not yet be asking yourself. How will my spouse/partner, children or relatives manage financially if I die unexpectedly?
Who Can Get It?
Life insurance is available for anyone between the ages of 18 to 75. If you are a parent with children between 3 months and 21 years of age, they can usually be covered under your policy for a lesser amount. Make sure to ask your insurer or broker, when you are taking out a life insurance policy, for more information about whom else can be covered under your policy.
How Do I Pay For It?
In most cases, you pay a monthly amount over a term which you decide you need cover for. This can be anywhere from 10 years to 40 years.
Why Do I Need Life Insurance Cover?
Life Insurance pays out a lump sum if you die during the term of the policy. You can also get policies without a set term and run until death as long as the premiums are maintained on the policy.
How Much Should I Choose To Get?
There is no set amount, as this is entirely up to the individual since it depends on your affordability. However, in general, the more cover the better. You should insure yourself based on the costs your loved ones would incur on your death, and the loss of income they might experience.
CHOOSING THE RIGHT LIFE COVER
Life insurance is not something we naturally tend to talk about, but often the trigger for the conversation is a life changing event, such as getting hitched or the arrival of a child. If you're thinking about taking out life insurance or moving provider, there are some vital things to think about before you start shopping around.
Work Out What Level Of Cover You Need
Take some time to have a look at your outgoings versus your income. This will give you a good idea of the amount of money your dependents would need to live on in the event of your death. Then, have a look at our online life cover calculator to get an idea of the level of cover that you may need.
Life insurance is ultimately about giving you peace of mind and ensuring your family will be financially secure if the unthinkable happens! As a nation, we don't like to think or talk about how financially exposed we could be by the death of a loved one, but it's a discussion worth having with your partner today.
Let Us Shop Around For The Best Value Cover
Before taking out life insurance, we'd strongly advise you to visit our life page on our website. There's never been a better time to look for cover as the market is so competitive at the moment, and we always have special offers and discounts available - in fact, you may get up to 50%* off your first year premium or a discounted monthly premium for the duration of your life policy.
If you already have life insurance you should review your current policy to make sure you have the right type and level of cover, just remember to compare like for like when getting a quote.
THE CHILL LIFE INSURANCE CHECKLIST
We’ve come up with a quick checklist that is designed to make taking out, or switching, life insurance much simpler and less overwhelming.
Step 1: What Type Of Cover Do You Need?
Whether you are taking out your first mortgage, wanting to make sure your children will be financially taken care of if you were to pass away or thinking about covering the cost of your funeral, there is a policy to suit your needs.
If you are searching to find the best type of cover to suit your budget and means then you need to be aware of the main types of life insurance policies available. These include:
Personal Life Cover.
Whole of Life Cover.
Over 50’s Cover.
Specified Serious Illness Only Cover.
Step 2: How Much Cover Do You Need?
This is a great question as you will need to consider the following:
- The size of the pay-out you want to leave behind to your next of kin.
- How much would they need to get by if you were to pass away tomorrow?
- Would your next of kin be able to meet their financial commitments without your income?
- What financial commitments would they incur on your death e.g.Crèche fees, school fees.
The amount of cover you may require is usually guided by these three areas.
Step 3: How Long Should You Take Out The Policy For?
The term of the policy differs from person to person and can often depend on the amount you can afford to pay each month. A major factor to consider is where are you on your life cycle?
For example, if you have a 3 year old, you could look at taking out a 22 year term to bring the child up to 25 years old when they would hopefully be earning their own money and be able to take care of themselves if anything were to happen to you in the interim.
Retirement age is another gauge of how long you should take out cover for. You could look at taking out cover until you reach the age of 65 so if you are 30 you might want to take out a 35 year term.
Step 4: How Much Can You Afford Each Month?
You need to look at your budget and decide how much you can afford to pay each month. Ideally it will be an amount that won’t put a financial strain on you now and for the entire term of the policy.
Everyone’s monthly premium will no doubt vary depending on your age, health, length of term, smoker status, and the amount of cover you want to take out. If the premium seems too high and you don’t think you would be able to pay it every month you should look at reducing the cover slightly. Having a smaller amount of cover in place is better than having no cover at all.
Step 5: Be Honest About Your Health
Health questions make up a big portion of the application form for life cover. You need to make sure you are completely honest in filling out these forms as any non disclosure can mean that you will not be covered in the event of a claim.
For example, if you were to have a history of heart disease. If this was not disclosed on your application and you died of a heart attack during the term of the policy then the life company, after checking your previous medical history, may not pay out in the event of death. This in turn may leave your family exposed to cover any further debts/bills/expenses.
It is best to adopt a ‘better to be safe than sorry’ method of completing these forms by mentioning all pertinent information you think may be relevant.
Step 6: Be Prepared
Always remember to give yourself enough time to get your cover in place in case your life insurance provider may need to do further investigation. Based on the information you provide to the Life Company, they may choose to request a questionnaire on your condition/illness. This can involve writing to your GP for a report on your condition/general health or you may need to do medical with a nurse before being accepted cover and in turn, getting your policy documents issued.
Any disclosure you make on an application form may need to be investigated then which can have other knock on effects leading to delays in other processes such as drawing down on your mortgage.
TYPES OF LIFE INSURANCE POLICIES
Mortgage Protection Cover
This is the least expensive form of life cover you can have. Usually a bank will require this type of policy to secure a mortgage before draw down. It is designed to pay off your mortgage should you pass away during the mortgage repayment term. The premium is guaranteed and will stay the same for the duration of the policy.
- Serious Illness can be added to this policy on an accelerated basis and is paid out of the ‘death benefit’.
Level Term CoverThis means that the sum assured remains at the same level throughout the term of the policy. You can add inflation protection to your policy and the premium and benefit will increase without medical underwriting each year. Every insurer has different rider benefits that can be added to make the cover more comprehensive so don’t forget to ask our team to explain their benefits further.
- You can also choose to add an amount of Serious Illness in addition to the death benefit (Stand Alone) or to be paid out of the death benefit (Accelerated).
Convertible Term Cover
A great option for the young! This policy is also level cover but allows you the option to convert the policy for another term before age 65 without medical underwriting and for only a small increase in the premium. This is also age and smoker status dependent. It is similar to Level Term Cover as the sum assured remains at the same level throughout the term of the policy.
- You can choose to add an amount of Serious Illness cover in addition to your death benefit.
What’s your most important asset? Your income! This policy is extremely beneficial for the self employed who are not entitled to state disability. It’s also very beneficial to an employed person as both can claim tax relief on the premiums at their marginal rate and take out a policy inline with any sick pay arrangement in their company.
The cover itself is a monthly income; you can cover up to 75% of your gross salary. This is paid to you on a monthly basis and taxed as your salary is. You also get to pick a deferred period of either 13, 26 or 52 weeks at which point the monthly benefit will kick in. The further out you push your deferred period will mean a cheaper premium for the life of the policy. Anyone looking to take out Income Protection should check, if employed, what sick pay they may get from their employer if they were to go out on long term sick leave. This will help you decide which deferred period suits your needs and pocket.
Stand Alone Serious Illness Cover
This cover can be taken out on its own with no Life Cover benefit. This level cover pays a lump sum amount in the event of being diagnosed with a specified serious illness listed on the policy. The life companies each have an extensive list of serious illness’s and they all cover major illness such as Cancer types, Heart attack, Stroke etc.
Over 50’s Cover
This cover is relatively new to the Irish Market. It’s designed for customers who are over 50 years of age and have absolutely no medical underwriting. This means you are fully covered on any pre-existing conditions, however you are not fully covered until the policy is in force for 2 full years. If a claim is needed before the 2 years only premiums paid into the policy will be paid back.
Whole Of Life Assurance
This type of policy is a guaranteed pay out once the policy premium is paid for the life of the policy. These policies can be quite expensive but can also be more cost effective for an older client who may be interested in Over 50’s cover. There is full medical underwriting for anyone applying for this cover.
Term Insurance With A Partial Whole Of Life Payment
Although slightly more expensive than a normal term policy it does have a guaranteed death benefit so the client always benefits from taking out this policy. The policy covers the amount you require for the term you need and then depending on the cover, will keep on a smaller amount of life cover (max €50,000) without any further payment until death.
Your insurer may have some of the following benefits that can be added to your policy. These can include:
- Death benefit
- Children’s death cover between 3 month and 21 (if in full time education)
- Terminal illness
- Special event increase
- 2nd medical opinion and or a nurse line
- Convertible option to roll your cover over without underwriting
- Hospital cover paid out based on the number of days you are in hospital
- Indexation – Index the policy annually in line with inflation to protect the sum assured
Make sure you check with your insurer, or broker, when you are taking out your policy about the specifics of your cover.
THE IMPORTANCE OF LIFE INSURANCE
Whether you are a parent with three children or a single 25 year old, a life insurance policy is an important thing to consider and is generally inexpensive. Below we take a look at some of the reasons why life insurance is so important.
Protect Your Family
If your loved ones depend on you financially, then life insurance is a must. In particular, it's important for parents of young children or partners who would not be able to sustain their standard of living, if you were to pass away. Similarly, you can add beneficiaries to your policy and create an inheritance for them. This can prove very useful, especially to children, setting them up for a solid financial future.
Pay Off Debts
As well as supporting everyday costs, specific life insurance policies can allow you to pay off any outstanding debts, if you were to pass away prior to them being paid e.g. mortgages, car loans etc. This can also include funeral costs, which can not only be quite expensive but are also an emotional stress.
Peace Of Mind
There is no saying when exactly someone will pass away, but unfortunately at some stage it will happen. Obviously, there is no amount of money that can replace someone in your life, but having life insurance can give you peace of mind, should you want to take care of your family when you are gone.
If you have any questions or need more information, feel free to leave a comment below or call the Life Team on 01 400 3400 - or you can always stay online and run a quote!