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Protect the important things in life - Life Assurance

 

Everyone these days has financial responsibilities of some sort, regardless of whether you are single, married, bringing up a family or nearing retirement. This is usually in the form of a mortgage, household bills or maybe a car loan, payment of which is dependent upon the income you earn. So what would happen if death brought a sudden stop to that income?

Life Assurance is a very emotive subject, as nobody wants to think about dying, but making sure that your loved ones are provided for in this eventuality is very important. Most life assurance policies are taken out in order to replace the income of the main breadwinner in a family, to ensure that in the event of his/her death, their partner and/or children are cared for financially. However, this does not only apply to the main breadwinner in a family, especially where there are children to be brought up. The remaining parent will have to decide whether to continue working or stay at home to take care of the house and children. A life assurance policy would provide the funds necessary to employ someone to do this for you.

If you are thinking of taking out life assurance, you should discuss your requirements in detail with a qualified Financial Adviser, who will help you select the right plan to suit you. The starting point, however, is to look at your current budget and the affordability of the various types of plans available, taking into account your needs from now on. Naturally, the minimum protection required in each case would need to cover all your debts at the time of death, such as your mortgage, loans, school fees and credit cards.

Many people will have company life assurance schemes in place that pay out to the widow/widower on the death of their partner. These private schemes, taken out by the larger companies, usually cover up to four times the annual salary of their employee and can go some way to alleviating the financial pressures. However, as a rule of thumb, you should consider cover for ten times the main breadwinner’s salary, which, when you take into account the rising cost of living, is calculated to cover between five to seven years of living expenses.

There are two main types of Life Assurance

  1. Term Assurance: whereby your life assurance is for a set number of years, after which time the policy runs out. This type of policy is widely used for mortgage or loan protection.
  2. Whole of Life Plan: whereby as long as you continue to pay the premium the cover is in place and it pays out upon death, regardless of what age you reach.

The second option is highly flexible and adaptable, and can include a number of other benefits, which can be changed to suit your circumstances as you go through life. For instance, you have the option to change the amount of protection you have or to take out additional plans, should you get married and/or your responsibilities increase. Couples can take out joint policies, which are payable on the death of the first partner, and another important option to consider is the added protection of critical illness cover, whereby the policy pays out a tax free lump sum on either death or critical illness, whichever comes first.

An added benefit is that policies can also be used to alleviate inheritance tax. This type of plan is written in such a way that the sum assured is paid out to benefit your children on the death of the last parent, thus giving them a tax-free sum equivalent to their inheritance tax liability.

The cost of a Life Assurance plan depends on your age and health. UP to a certain age, you are not normally required to undergo a medical examination, but your doctor may be asked to complete a medical questionnaire. To give you a better idea of contribution rates, we include an example of a quotation:

“Firstly, financially protecting your family need not be expensive”, comments financial adviser Janet Knight. “Let’s use the example of a married man of 30, who has just become a father and wants to ensure that if he dies before the child reaches the age of 18, there is €200,000 life assurance available to provide for his wife and child. In such a case he would be covered for less than €22 per month”.

Like a will, a pre-nuptial agreement or even an escape clause for business partners, a life assurance plan is not something you really enjoy thinking about in advance but if you want peace of mind, knowing that your affairs are in order and your loved ones/family protected, it is all the more vital.

 

 

Janet Knight (M.L.I.A..dip, FAIQ II) is an independent financial advisor with Offshore Investment brokers, accredited by the Chartered Insurance Institute (C11).

For more information on Inheritance Tax Planning and other financial advice, tel. Janet Knight on 639 067 704 or 952 798 002
or email her on janetknight@oibinternational.com