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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
- 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.
- 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
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