Life insurance guide for a financial advisor

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Caution is a word rarely used in financial circles. John Lennon wrote a song about a girl and titled it Dear Prudence, but when it comes to making sure that when you die, your loved ones are taken care of and / or paid off any loans or financial obligations, getting those kind of caution expensive.

All lenders in Ireland are required to ensure that their customers have mortgage protection when borrowing against their property, and also state that it would be prudent to consider life and health insurance for all other types of loans. This can range from accident or illness coverage to income protection – the only form of out-of-life insurance through a pension that provides tax relief at your marginal rate.

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In some cases, death coverage may be waived on home loans. If the applicants are over the age of 50 or are punished with more expensive premiums due to health problems, they have the choice of signing a waiver form which basically states that upon death, the surviving spouse or survivors must continue or organize the reimbursement. or renegotiate the loan at that time.

Also, ill health before the age of 50, resulting in higher life insurance premiums, may also enable you to apply for the Waiver.

Life insurance is cheap – there are three types of life insurance / insurance:

1. Reduction of life insurance (or mortgage protection) – As the name implies, your mortgage balance is covered and as the capital is repaid, so does the death coverage. This is the cheapest of the available types of life insurance. It’s also best to keep it nice and simple and not complicate things by including other risks, such as coverage for serious illnesses.

2. Level term assurance / convertible level term assurance – this means that whatever the amount originally borrowed is covered for the entire term, regardless of what the balance is when the life insured dies. This is therefore more expensive than decreasing coverage. With the convertible term life insurance you have the right to renew the policy without having to do medical work on the maturity date.

3. Lifetime coverage this will cover you until you die for your entire life. This is the most expensive, but the younger you start paying for these types of policies, the cheaper the premiums.

Dependents – younger or older – should also be covered financially if something happens to one of the parents. This includes stay-at-home mothers or housewives. Caution again dictates that if you have children, you must have a separate, stand-alone life insurance policy until the completion of the third level education of the youngest child, in case anything happens to you.

The recommended formula is: 10 times the joint annual net income minus any death benefits up to that completion date of the 3rd tier.

Joint life or dual life? The former ends the policy on the first death, while the latter pays out twice… on BOTH deaths. There is little or no additional cost for this feature, so always ask about it.

You can of course also take out insurance against Serious Illness (or life-threatening illness) – with a one-off payment if you contract a serious illness. Generally, the lump sum will cover you for a few years until you are back on your feet.

Unfortunately, about 95% of all claims are related to three diseases, so it is specific. Incapacity for work is covered by the Income Protection. This is true if you are unable to work for any reason – including nervous breakdown, you can receive up to 75 of your monthly income after a deferred period (usually 26 weeks, although you can opt for 13 weeks – a bit more expensive) until when your retirement commences or you go back to work, whichever is earlier.

This is also called permanent health insurance and it is the nothing but type of insurance outside the pension-related life insurance policy, whereby the premiums paid are tax deductible at your marginal rate. Especially if you are the only bread winner in the family, this must be taken into account.

For the best deals, contact your preferred insurance company, a licensed advisor, or send me a message at jlowe@moneydoctors.ie.

For more information click on John Lowe’s profile above or on his website.

The views expressed here are those of the author and do not represent or reflect the views of RTÉ.

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