‘Life Insurance offers a man the only way where he can make his Will before he makes his money.’
– Unknown Author
Whoever said this was right but how does it happen? How is the cost calculated? What types of cover are there? And what is the true benefit of it all? It’s worth exploring these questions further.
So how do I start?
While not the issue on most people’s minds and not the most pleasant, it is the most prudent as death is an evitable aspect of life and from a financial perspective providing for your loved ones when you are no longer here is one of the most loving things you can do for your dependents. Why? Because it transfers a pre-determined sum of money to them that you can no longer provide through labour.
How is the cost of Life Cover arrived at?
The cost of life cover will depend on three factors: your age, lifestyle, and health. The older we get, the closer, statistically, to death we become so naturally you can expect to pay a higher monthly premium as you age. This is why buying life assurance cover earlier on in life is necessary in order to pay a lower monthly premium. A person’s lifestyle, if a smoker and/or Skydiver for example (but not exhaustive), would pay a higher premium than a person of similar age who is a non-smoker working in an office. In addition, as we age our generally unhealthy lifestyle through poor diet or lack of exercise brings on other medical conditions that might impair a life. Again, another reason to take out life cover at a younger (healthier) age! And finally, if a person has a family history of health issues, they can expect to pay a higher premium also due to the possibility of dying younger.
What Life Cover options are available to me?
There are two main types of Life cover available on the Irish Market, Term Insurance and Whole of Life Assurance.
Term Insurance is available for a pre-agreed period of time and is usually availed of by people with young children until they grow up or for a specific purpose, to pay off a mortgage for example. Term options vary between Level, Decreasing and Convertible term with each carrying its own benefits.
Whole of Life Cover, as the name suggests, provides cover for the whole of one’s life provided you don’t stop making premium payments. There is also an investment aspect to this policy type as, if cancelled, you will receive a lump sum in return, and certain Whole of Life policies can be structured to cover inheritance tax liabilities too. It is important to note however that this cover type is far more expensive than Term Insurance cover.
Sounds good, but what is the true benefit of it all?
Ultimately peace of mind. The lump sum payable on death is tax-free and could be used for a number of pressing needs which may include child-care costs, college fees, paying off a mortgage, clearing debts, caring for an elderly relative or investing and receiving a regular income.
If making a ‘Will’ before making the money sounds good to you, do get in touch as this insight title suggests, to get your Life Covered.
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