Life Cover and Family Protection
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“I wanted to arrange life cover for myself and my wife to offer financial security to my family. I found the advice from Cregan Kelly Financial Services first class. They explained in great detail the best type of policy to suit our needs.”
Mark & Marguerite Conway, Dublin
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Life insurance/Assurance and Family Protection
We all want to provide for our family, but what would happen to your loved ones in the event of your death? If they could not rely on your income, how would they manage financially?
Family protection is another way of describing life insurance, pays out a lump sum or a regular income on death and can offer a financial lifeline to grieving relatives. A policy could cover day-to-day expenses or even a specific commitment, such as school fees.
Term insurance is the simplest and often the cheapest because it pays out only if you die within the defined term. For example, you might take out a 25-year plan so the policy would pay out if you were to die in the next 25 years. Your family would get nothing if you were to die after the end of the term. You can buy level term insurance, where the pay-out remains the same whether you die in year one or year 25. Or you can arrange decreasing term insurance so the pay-out gets gradually smaller. For example, a policy might pay out £100,000 in year one but only £5,000 in year 25. Decreasing term insurance is often linked to a repayment mortgage because the amount you owe the lender reduces over time.
Another option is family income benefit. Here, instead of a lump sum pay-out, the insurer commits to paying a set monthly income from the time of the claim to the end of the agreed policy term.
A regular income can be easier to manage as it can simply replace your salary. Premiums can also be cheaper as the longer you live, the less the insurer has to pay out.
The premiums for both level and decreasing term insurance and for family income benefit are fixed throughout the policy term. However, decreasing term insurance and family income benefit tend to be cheaper than level term insurance.
Whole of life cover
Whole of life assurance pays out whenever you die. It is usually linked to an investment such as a pension or an endowment policy and is often the most expensive type of cover because a claim is inevitable (which is why it’s called assurance; insurance is for something that might happen). The premiums can vary if the investment performance is poor.
The amount of cover you need depends largely on your personal circumstances and your budget. If you have several young children, for example, you may need more cover than someone with one older child.
The size of your mortgage can also help to determine the size of the sum insured.
Check, too, whether you have any existing cover. For example, your employer might offer death-in-service benefit, which could pay a lump sum of around four times your annual salary if you were to die while still employed by the firm.
You should include any potential death-in-service pay-out when determining how much insurance you need to buy.
Insurers take into account a number of risk factors when setting the premiums for life insurance. Older people are obviously more risky than younger people as they are more likely to die sooner. For the same reason, someone in poor health can expect to pay more for family life insurance. Dangerous occupations and pastimes can also push up premiums.
Financial Tip: Life assurance costs have reduced over last number of years. We may be able to save you money on your existing life cover or mortgage protection policy so contact us if you have a life policy, especially one whereby the premium is due to increase shortly e.g. a Whole of Life policy.
Factors Affecting Life Assurance/Life Insurance/Life Cover
Why Cregan Kelly Financial are Ireland's number one life assurance advisor