Life Assurance

No matter how much you earn, it is important to make sure your dependants (people who rely on you for financial support) have enough money to live on if you die. A life insurance policy can protect your dependants against financial hardship by paying them a lump sum after you die.

When you might consider a life assurance policy

  • Your family or others rely on you for financial or other support
  • You have any loans or debts, such as a mortgage on the family home
  • You act as a guarantor on a mortgage for somebody else

When you may not need life insurance or less cover

  • You do not have any family members or close friends who depend on your income
  • You have ‘death-in-service’ benefit through your job or pension plan – this kind of plan pays out a lump sum if you die during your working life
  • Your dependants would be entitled to enough social welfare benefits to live on after you die
  • You have investments or property that could provide an income or be sold for cash
  • You are older and your family is grown up
  • Your partner is earning an income

How much life insurance do I need?

If you have a young family, you will need to provide a larger lump sum than if your children were older. That is because the benefit has to last longer. You will need to consider buying enough insurance to:

  • Give your family an income for as long as they need it.
  • Pay off your mortgage and any other financial loans.
  • And cover bigger costs that might arise as your children get older – for example, school or college fees.

How long do I need life insurance for?

If you have a young family, or plan to have more children, you may want to put life insurance in place at least until your youngest child has left school or finished college. This could mean having life insurance for a term of at least 20 to 25 years.

If your children are older, five or 10 years of insurance may be enough. Some policies, such as whole-of-life policies, give you insurance for your lifetime so you do not have to decide on a specific length of time (the ‘term’ of the policy).

Who should I insure?

If you are in a relationship and have dependent children, it is important to consider what may happen if either you or your partner died. For example, if you are involved in looking after your home and children, there could be extra childminding or housekeeping costs if you died. So, you may want to consider a joint or dual policy. This covers two people on the same policy, and could pay out a lump-sum benefit if either of you die (joint-life insurance) or if both of you die (dual-life insurance) within the term of the policy.

Life Assurance – A Summary

Term Assurance

  • You decide the sum assured (amount of money) and the term (number of years)
  • The premium (amount you pay) and sum assured are fixed for the term (except for index-linked policies)
  • The policy pays out the sum assured if you die within the term
  • The payment usually goes to your estate to benefit your dependants or other beneficiaries but you can choose a particular beneficiary
  • You can inflation proof the premium and sum assured
  • The Term Cover can have the conversion option which allows you convert your policy into a new policy irrespective of your state of health

Whole-of-Life Assurance

  • It pays out a cash lump sum if you die at any time while the policy is active
  • The payment usually goes to your estate to benefit your dependants or other beneficiaries but you can choose a particular beneficiary
  • The policy benefit can fall if the policy value falls but you will have the option of increasing your premium to maintain the sum assured
  • It is more expensive than a term life policy
  • The premium is not usually fixed. It can increase
  • The policy continues as long as you continue paying the premiums

Mortgage Protection

  • This is generally a reducing term life policy that pays off your mortgage if you die within a set number of years
  • The money goes to your lender, with usually no cash lump sum for your dependants
  • The sum assured and term are usually the same as your mortgage
  • The premium does not increase
  • The money paid out generally reduces as your mortgage balance goes down, unless you have a level term policy
  • This is the cheapest form of life insurance

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*Subject to underwriting criteria