Do I Need Life Cover?
Simply put – If someone would suffer financially on your death then you need life cover.
Please see below the different categories of people who need life cover.
1. Parents
2. Couples with no children
3. Self Employed
4. Retired
5. Single with no dependents
A) Parents
As you know, having a child changes everything. But did you know it also changes your life cover needs? As parents we love to be able to provide for their every need but as you know, everything from food and clothing to education and medical expenses can really add up. We all know how much our children depend on and appreciate our support. This feeling of knowing they are provided for is one of the many joys of being a parent.
There is no doubt however that raising a family can be financially challenging at times, as with everything in life.
As incredible as life can be, it can at times present moments of uncertainty. It is fragile and something that must be protected. We know this even though we do not like to think about it.
In the most unfortunate event that something should happen to you, how would your family cope financially? Just think about this for one minute.
Now ask yourself “Do I Need Life Cover?”
We believe everyone should be aware of and prepared for life’s uncertainties. And while we cannot prevent certain misfortunes, we can protect those around us from suffering financially as a result.
Why do you need it now?
There is a common misconception that the amount of life cover you need increases as you get older. This IS NOT the case. A young family has more long-term financial expenses and dependencies than a more mature couple whose children are financially independent.
Life cover has never been so competitively priced. Over the last decade due to medical advances and lifestyle improvements which in turn, lead to an increased life expectancy, life cover premiums have dropped significantly. There has been a large decrease in the cost of Life Cover over the last decade, making now a very cost effective time to take out or review your policy
When you hear of a lump sum pay out of €200,000 do you think, “of course that would support my family for decades”?
We encourage you to think carefully about this. And more importantly, consider your monthly financial commitments. After all it is this that determines the length of time your policy payout wil
l support your loved ones.
Single Parent
You are the sole earner, cook, taxi driver, entertainer and more. With so much responsibility and no spouse to share it with, there’s no question that you need life. If you die your child’s future is left in the hands of others. Without a cash lump sum to provide for her future, she will become a burden to someone.
Couple with Children
You absolutely need life cover. It’s your responsibility as the adult to make sure your children will be taken care of should you leave us before your time. It’s your duty as a parent to prioritise making sure they are financially secure.
Stay-at-Home Parent
Stay-at-home parents make huge financial contributions to their families. Childcare, driving, cleaning, cooking and household management all cost money. If you are a stay-at-home parent, you should have a life insurance policy to leave a lump sum to cover all the activities you do that will have to be replaced.
B) Couple with no Children
You and your partner share everything. That’s why it’s important for each of you to have your own life insurance policy. If your partner dies, your life insurance policy would allow you to cover shared expenses.
You definitely need life cover if only one of you is working. If you are the sole earner and you die, who is going to take care of your partner?
In addition, if you’re planning on having children, it’s a good idea to buy your life insurance policy before becoming pregnant to qualify for all life insurance benefits.
C) Self Employed
If you are self employed you are not entitled to State disability payment should you be unable to work. If you stop working, your income stops. Income protection can protect you. It can provide you with up to 75% of your income should you be unable to work due to ANY illness, injury or disability.
D) Retired
If you leave an inheritance to your family, they could be hit with a large tax bill after you die. Your life insurance policy is usually paid out immediately, allowing them to use the proceeds to pay their tax bill.
E) Single without Children
You probably don’t need life cover but if you have a mortgage you need mortgage protection. Do you provide financial assistance for anyone? Do you have any other debts? If your death would cause financial suffering to anyone then you may also need life assurance
Types of Policy
Single life
Pretty much what it says on the tin; one person is covered. This could be you, your husband, your wife etc. If this person dies within the term of the policy, the proceeds will be paid to the policyholder’s estate.
Example: Julie is single mother and starts a life insurance policy for €200,000 for 20 years. She dies in year 18. The €200,000 is payable to her estate. The policy ends.
Joint Life
As it suggests joint life cover is taken out for two people and is payable on one death within the term of the policy. This can be structured in two ways:
Joint Life – First Death: the policy will pay out after the death of one of the people covered.
Joint Life – Second Death: the policy will pay out after the death of the second person covered.
Joint Life First Death is the most common policy to be taken. When the claim is paid, the proceeds will be paid
to the other policy holder. As there is only the potential for one payout, there can only be one sum insured, i.e. the two lives cannot be covered for different amounts.
Example: Tom & Mary have a joint life first death policy. They are covered for €250,000 for 25 years. In year 20 Tom dies. €250,000 is paid out to Mary and the policy ceases.
Dual Life Insurance is similar to Joint life insurance, in that it is set up on two lives. The fundamental difference is that a payout is possible on both lives. This is a very valuable family protection option.
Example: Tom & Mary have a dual life policy for 20 years. Tom is covered for €200,000 and Mary is covered for €150,000. After 6 years Tom dies and €200,000 is paid to Mary. The policy remains in force, and Mary remains covered for €150,000. If Mary were to die within the remaining term, her estate would receive €150,000. If Julie was still alive at the end of the term, the policy would cease.
What is a Conversion Option?
A conversion option is a very valuable benefit which allows you to “convert” your policy to another plan, at any stage throughout the term of your policy, without providing any evidence of health. You can include a conversion option in Life Insurance Cover and Serious Illness Cover.
Example: Tom has a life insurance policy with a conversion option that he took out 12 years ago. He needs new life insurance cover for a mortgage on an investment property that he is buying. His health is not as great as it was 12 years ago – he now suffers with disbetes and is over weight. If he took out a new policy, he would have to pay an increased premium due to his health. Instead he “converts” his existing policy to cover his new mortgage. The premium is based only on Marks current age and his health is not taken into account.