All I want for Christmas is . . . life cover for my family?
It’s not the most cheerful of subjects, but it can bring peace of mind. If you don’t know the difference between insurance and assurance, or mistakenly thought that your life insurance policy was for life, then you are not alone. Having financial security for the family is a real reason to give some thought to life assurance sooner rather than later. In a recent article in the Irish Independent we answered some common questions we are asked:
So, what is Life Insurance?
Like home or car insurance, a life insurance policy pays out when something goes wrong, essentially in this case, the death of the insured person(s).
Does Life Insurance last for life?
It can, but most people have term assurance, which is a life insurance plan that covers you for a specified amount over a specified term. In the event of death within the fixed time period, a cash lump sum is paid out to the insured person’s estate or a nominated benefactor(s). There is no pay-out at the end of the policy term, if the insured has not died – just as with any other form of insurance, such as car or home insurance, where a claim is not made during the policy term.
How long is the insurance term?
Life insurance can be purchased to cover different terms; factors such as the age of children or length of time to retirement would be taken into account. Generally a minimum term is calculated to the age a youngest child will reach independence, if the policy is for family protection. Those with no children, looking to financially secure a remaining spouse, would normally buy a policy up to age 65, with an option to convert to longer-term cover after that.
I have Mortgage Protection; is this not life cover?
Mortgage protection is the most basic form of life assurance and the cheapest. It generally decreases each year in line with the mortgage balance outstanding. Remember, however, that this cover is intended to pay-off the mortgage amount owing to the financial institution. While this may secure a home, it does not provide a cash income to the family.
How much does life insurance cost?
How much you pay varies, depending on the insurance provider, but the main factors that dictate the price include the sum assured for, the length of term of the policy, the type of insurance policy, your age, your health, especially any existing medical conditions, and whether or not you smoke. Policies can cost anything from €15 a month depending on these various factors. As an example a non-smoking couple in their mid-30’s can take out €250,000 over 10 years for circa €30 per month.
How much will a policy pay out?
Each individual determines how much their life is insured for, the amount usually recommend within the life assurance industry being in the region of ten to fifteen times net salary. This figure, therefore, is a key factor in determining the cost of the policy.
What if I get ill and cannot provide for my family?
Specified Illness cover can be taken out as a standalone plan, or as part of a life insurance policy. It pays out a lump sum if you are diagnosed with a condition specifically listed in your policy. This type of policy tends to be more expensive than life assurance, as you are five times more likely to claim throughout the policy term than you are to claim on a death policy.
Can couples get life cover together?
Joint life policies and dual life policies are sold, but note the difference in benefits received by claimants on the two types. A joint life policy offers only one pay-out in the event of a death to the surviving claimant. However, a dual life policy will provide separate pay-outs to the estate on the death of each claimant.
John Molloy and Sarah McGurrin of Orca Financial Ltd set up the new online comparison site www.oomph.ie to prompt greater awareness of life assurance options, and to simplify the process of purchasing competitively-priced cover. Oomph is a registered trading name of Orca Financial Ltd and Orca Financial Ltd is authorised by The Central Bank of Ireland.