How to save money on life assurance
WE all want to do the very best for our family and to make sure that we can provide them with financial security. But what would happen to your family's finances if you were to die?
It's certainly not a comfortable thought, nor is it one that any of us like to dwell on for too long.
If you have a young family, then the financial turmoil created by a sudden death of a parent can be devastating. Life assurance is one way to protect your family from this.
When deciding what level of cover you may need, consider the number of dependents in your family, whether there is a second earner, the level of cover required for a partner working in the home, the cost of providing for childcare – as well as any long-term borrowings or loans.
As an insurance broker, I deal with a few claims every week. A simple tip I'd give to those who already have life assurance is to ensure your family knows what cover you have. I've had cases where many months later, a surviving partner has discovered by chance a direct debit or a piece of paper which leads them to realise a policy was in place.
If you have a young family or plan to have more children, you may need life cover until your youngest child has left school or college. The need to protect your children against a sudden loss of income should cease when they become financially independent. Some children leave school at 16, whilst others will continue with full-time education until well into their 20s. Do not waste money buying cover for longer than you need. For example, if your youngest child is three, don't buy a 30-year policy but instead buy a 20-year one.
You won't find many insurers or banks going out of their way to tell you they have cheaper products so it is up to you to find savings. Many insurers have special offers – but only if you ask.
Here are five ways to shave money off your life assurance bill.
* Cut out unnecessary add-ons – many are of dubious value for money. An exception to this rule is an add-on called a conversion option. This is a very valuable benefit which could save you a fortune if you need another policy in later years and your health has suffered. Don't buy a life assurance policy without it.
* If an adviser recommends a whole-of-life policy, be aware there are guaranteed and non-guaranteed products.
Non-guaranteed policies should be avoided as they are subject to review – so in future years, the premiums you pay can be increased or the cover reduced. These policies tend to bomb out in later years and become unaffordable – which has led people to cancel them before a claim is paid.
Guaranteed whole-of-life policies are a different proposition and Aviva and Zurich would be considered market leaders here by many brokers.
* If you are self-employed, consider a life assurance product called 'pension term assurance'. You can save tax on premiums with this product.
For example, if you pay tax at the higher rate of 41 per cent and your monthly premium is €20.85, you'll save €8.55 a month on tax so the policy only costs €12.30 a month.
* If you have decided you need serious illness cover but find it too expensive, some insurance companies offer cheaper cancer-cover only policies. In 2011, 81 per cent of the serious illness claims made by Zurich Life's female customers, and 61 per cent of the claims made by male customers, were for cancer.
* Another way to save money on your life assurance is to give up smoking. You'll save hundreds over the life time of your policy – and you'll also live longer.
John Geraghty is director of the online discount brokers LABrokers.ie