Of all the different kinds of insurance and insurance provides out there, life insurance is perhaps the most daunting and the one we least like to talk about. No one likes to imagine what would happen if they died, but life insurance or life assurance can give you peace of mind that, should the worst happen, your loved ones will be taken care of. That’s why life cover is such a good idea and the reason why you need life insurance. Here is a simple and straightforward guide to life insurance in Ireland.
What Is Life Insurance?
Life insurance is a kind of policy where you pay a monthly or annual premium to a insurer who will pay a (tax-free) lump sum of money to your family or representatives in the event of your death. It can be offered for a fixed term, for example 20 or 40 years, up to a certain age or as lifetime cover.
Who Is Life Insurance For?
If you are asking who is life insurance for, we can say that anyone can take out a life insurance policy, and it is generally recommended to do so once you have someone else to look after, for instance, a spouse or a child. This is because the life insurance payment often serves as a replacement of the deceased’s income (income protection), pay off any remaining debts (mortgage protection) or go towards funeral costs. Without a life insurance policy, in the event of your death, your loved ones would have to take on the financial burden on their own.
However, after a certain age, you may struggle to find a standard life cover insurer who will let you take out one of their insurance policies. Many do not offer life insurance to people over the age of 74, though there are some that will let you take out a plan even in your early 80s.
While it’s not as common, younger people with no dependents may also want to take out life insurance policies to take advantage of the lower premiums associated with their age. Many life cover insurers offer premiums that stay the same throughout the term of the life insurance policy, so taking one out at an early age can result in savings with life insurance of several thousand Euros over the lifetime of the insurance policy.
What Medical Information Will I Need To Provide for Life Insurance Company?
All life insurance providers will require you to fill in an application form that usually includes various questions about your health and serious illness, for instance your family’s medical history and any existing conditions or medications you take. For most people, the answers alone will be enough to get you accepted onto a plan by a life insurance company. However, depending on your age, health and the amount of life insurance policy you are looking for, the insurer may also ask for:
- Blood tests
- A medical exam by your GP
- An independent medical exam
You may be able to avoid these extra tests and appointments by simply applying to another insurer. There are no set guidelines for when additional medical information is required, and it is simply decided on a life insurance company by company basis.
Are There Different Kinds Of Life Insurance Plans?
There are several types of life insurance policies out there designed to suit people of different ages and circumstances. Generally speaking, in Ireland you will find Whole of Life insurance and Term Life Insurance. Here are the key differences between the two along with some other points to be aware of.
Whole of Life
As the name suggests, this type of life cover plan covers you for your entire life, leaving a lump sum when you die. There are two options of this life cover out there, which as as follows:
- Guaranteed option, where the price is fixed for the entirety of the cover, presuming you keep up with your premiums.
- Reviewable option, where the insurer can review your premiums, potentially leading to significant price hikes. Though they can seem like an attractive option at first thanks to low initial premiums, they can often end up being unaffordable in later life.
Term life insurance covers you for a set period of time, for example 40 years, and once that term is over you are no longer covered. In other words, the benefits will only be paid out if you die during the term of the policy. The different kinds of Term Life Insurance options are:
- Level term, where the benefit is paid out if you die within the specified term
- Decreasing term, where the amount you’re covered for decreases over the life of the policy (used to cover a debt that reduces over time, for instance a mortgage)
- Increasing term, where the amount you’re covered for increases over the duration of the policy to keep in line with inflation and cost of living.
Most life insurance companies do offer a conversion option for Term Life policies (term insurance), so you can extend your plan in the future without having to provide any additional medical information. This can be a cost-effective alternative to taking out a Whole of Life policy, which tends to be more expensive.
Over 50s Life Insurance
There is one other kind of life insurance that is designed especially for people over the age of 50, regardless of your help. Over 50s Life Insurance involves no medical questions on the form, and as long as you are in the qualifying age bracket you will be immediately accepted. This type of life insurance is a great option for over 50s who have previously been denied life insurance due to your medical history.
What Does Life Insurance Cover?
Though it is their primary purpose, most life insurance policies do more than pay out a lump sum of money in the event of your death. Exactly what is covered will vary from insurer to insurer, but policies can also include things like:
- Mortgage protection insurance, designed specifically to help pay off the remaining balance or overpay mortgage if you die or if you are diagnosed with a serious illness specified in the plan. This mortgage protection insurance is often compulsory if you want to take out a mortgage.
- Serious illness cover, that can be included in mortgage protection as an extra benefit. However, it can be sold as an insurance policy on its own
- Income protection, that will pay you a regular income (up to 75% of your annual salary) if you can’t work due to injury or illness
- Specified illness cover, where you will receive a lump sum payment if you are diagnosed with a specified illness in the plan. Specified illness cover is sometimes applied to as critical illness cover or serious illness cover
- Business protection, which protects against the loss of a valuable member of your business like an employee, director or partner
- Accidental death cover, if death occurs by accident as opposed to old age or serious illness
- Terminal illness benefit, that will pay out before your death if you are not expected to live longer than 12 months. Terminal illness is more commonly used for progressive diseases such as cancer or advanced heart disease
While these may be included in some policies, some types of life cover will be optional extras. Always make sure to read carefully and be crystal clear about what is included in your life protection before you make a decision.
Dual Life or Joint Life Coverage
If you are looking to insure more than one person, for example you and your spouse, you will find that there are two options available to you – Dual Life or Joint Life coverage. We usually advise opting for dual life rather than the second-mentioned option – the price difference is often minimal, and dual life means that both parties are covered for the duration of the term for the full amount of the lump sum insured i.e. if both parties die, the policy will pay out a lump sum for each party. Joint life means that the policy pays out once i.e. on the first death, of either partner.
How Much Does Life Insurance Cost?
The price of life insurance will not only vary between insurers but also on a range of personal factors like your age, health and whether or not you smoke (you will pay less if you are non smoker). Some of the leading life insurance companies on the market are for example: Aviva, Royal London, New Ireland, Irish Life, etc. Naturally, there will also be differences based on the length of the term you choose as well as the level of cover. However, most premiums are fairly affordable for anyone who need life insurance, with some as low as €10 per month for young non-smokers. There are also options to pay your life cover annually or every 3 or 6 months if you would prefer.
The best life insurance policy for you will depend on your age, personal circumstances and financial objectives. If you would like personalised advice on what kind of life insurance would be best for you, we would be happy to help.
Our experienced team at SCK Group provide accounting and financial planning services for individuals and businesses in Ireland. Through a preliminary consultation, we can help you formulate a plan that will give you all the coverage you need and the confidence that your family will be taken care of. To get in touch, simply head over to our contact page and we’ll get back to you as soon as we can.