The mycash.ie quick guide to life insurance

The mythical life insurance salesman has long been seen as a figure to avoid but, before you kick his foot out of your door, it’s worth considering just what he might have to offer.

How much cover?

There’s just no getting away from reality: if you are the main breadwinner and you have dependents, you are going to leave a whole lot of financial trouble behind if you die ahead of schedule. In fact, even if you are not the main breadwinner, a premature death can have calamitous consequences. People tend to drastically underestimate the contribution of, say, a spouse working in the home – until they need to hire in replacement help.

So the first thing to think about is: “How much do I need?” You will get some idea of that from the mycash.ie Life Cover simulator. This tool will take account of your circumstances and guide you as to the level of cover you need.

Don’t forget, you already may have some cover in place: for example a mortgage protection policy. It’s a good idea to keep a list of your policies and make sure someone knows where they are.

 

Different types of cover

Term insurance offers insurance for a specified period, say 10 years. If you live beyond the term there is no payout. Term insurance is useful, say, if there’s a period of time when you and your family are particularly vulnerable. After the 10 years you can reassess your needs.

Level term insurance is so-called because the sum insured remains the same for the life of the policy. A mortgage protection policy, on the other hand, is a form of term assurance but the sum insured drops as the outstanding mortgage falls over time.

You can add a convertible option to your term policy. A convertible policy lets you convert a term policy into a new policy without any reference to your state of health at the time and for up to the same sum assured as your existing policy. You may also opt for indexation, where your cover increases each year according to inflation (of course your premium increases also and may increase at a greater rate than the inflation rate depending on the product, so beware).

Whole-of-life assurance pays out no matter when you die. Here, the premium is higher and regular premium reviews can increase the cost of your cover dramatically. But these policies are more flexible than term policies and cover can be increased or decreased at any time.

 

How much does it cost?

The cost of your life insurance depends on a number of factors:

• Your age
• Your gender
• Occupation and lifestyle
• General health
• Whether you are a smoker
• The term
• The amount of cover you need

 

It is important to be scrupulously honest when disclosing information to your insurance company, for example your state of health, otherwise your policy could be invalidated and your claim rejected.

The mycash.ie Life quotes engine will tell you what your cover will cost can be arranged for a single person or a couple. In addition to term assurance, the engine lets you build in insurance for serious illness or get a quote for illness only.

Once you have filled in each box (get an explanation for what each box means by rolling over the description) you can click the quotations button. You will then get a list of quotes.

In the case of an application from a couple, cover will be either dual life or joint life. Dual life cover pays in the event of either person dying and is the same as if each person had an individual single policy. Joint cover pays on the death of either insured person.  

Unfortunately, life insurance premiums don’t qualify for tax relief (unless you are self-employed in which case a special term policy known as a Section 85 policy may allow tax deductions). Life policy payouts are tax-free but individuals who inherit your estate may have tax liabilities depending on their circumstances.