It is really important to have the right amount of Life Insurance Cover to protect your family’s standard of living.
Almost 60% of Irish families with children age under 18 wouldn’t be able to cope if the main earner died. (Amarach research)
Protection needs are individual and they vary widely from one person to another, but the points everyone needs to consider are:
- The need to maintain your family’s standard of living.
- The ability to pay off your mortgage and other loans.
- To be able to cover any costs when your children are older, eg school/ college fees.
Most people take out a policy to provide a benefit that will provide for their children until they are self supporting. The most common term chosen would be 20 years.
How to calculate how much cover you need:
Option 1 – calculate the replacement income your family would require in the event of your death. (i.e. how much you need to live on each year). From this figure remember to allow for possible additional payments such as pensions or social welfare.
The amount of replacement income dictates the amount of life cover you should have. For example:
|Net income required by your family||Amount of life cover that you’d require to fund the shortfall in income|
|€6,000 a year||Requires €200,000 of life cover|
|€12,000 a year||Requires €400,000 of life cover|
|€24,000 a year||Requires €800,000 of life cover|
Example of typical costs for €200,000 of life cover over 20 years
age 30 – policy would cost € 12.45 a month
age 35 – policy would cost € 15.66 a month
age 40 – policy would cost € 21.32 a month
age 45 – policy would cost € 31.85 a month
The above are standard premiums. LABrokers may be able to get you a discount off rates by taking less commission from the provider thus driving down the monthly cost for the life of the policy.
Option 2 – You know how much you need in an ideal world but find you are stretched. Simply purchase as much cover as you can comfortably afford for a given monthly outlay.
Which companies are most competitive:
Currently the most competitive life insurance companies tend to be Zurich, Caledonian Life, Irish Life and Aviva. Many companies will match another on price so it pays for you to do your homework in advance.
Aviva have a benefit attached to their policies called ‘Best doctors’. In a nut shell this is a free benefit and gif you are diagnosed with a serious illness it gives you access to some of the best minds on medicine to help you get the right answers about your medical condition, diagnosis, and treatment.
Self employed persons – consider pension term assurance. You can claim tax relief on the premiums you pay but the policy can’t be assigned against a loan.
Terminal illness benefit. Look out for this on your policy. It is an optional upfront payment of your life assurance cover if you are diagnosed will an illness where death is likely to occur within 12 months. We paid out on a recent claim for this type of benefit to a woman who used the proceeds to clear the outstanding balance on a home loan and to pay for medical expenses.
Free cover for children. When you take out life cover most companies will cover all of your children under age 21 for a death benefit of up to €6,000.
Don’t buy a policy for any longer than 25 years. If you want to keep your costs down consider a 15 or 20 year policy but include a conversion option. In that way you can extend the cover at a cost of your then age but the key is the insurer cannot ask you for evidence of good health.
Think twice before you purchase optional ‘add ons’ such as accident or hospital cash benefit. They are expensive. Keep it to a simple life cover only policy.
If you have a child with special needs you may need specialist advice.
LABrokers specialise in life insurance cover and for an instant quote see LABrokers.ie