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How to ensure there'll be no debt after life

With people living longer and longer, it is well worth reviewing life insurance cover, writes Sinead Ryan

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Of all the insurances we buy (house, car, gadget etc), life insurance is probably the one we are least likely to switch. This is because we buy it only once or twice in our lives, and it's often attached to the mortgage or pension, so we don't think we can move it to another company, but actually it's the rare bird in the insurance world: rates have been dropping steadily over the years as life expectancy has increased.

This compares to practically every other form of insurance which has seen massive hikes. So, you could already be paying too much.

In 2000, the average Irish person could be expected to live until 76.6. By 2017, figure rose to 82.2, one of the biggest increases in the OECD, and it's rising still.

That means while things like health insurance and pensions get more expensive, companies can offer better rates on life cover, so it's worth checking to see if you should switch.

Types of Cover

Life insurance isn't one product; there's a suite of policies out there, some more price sensitive than others. With 10 being the easiest and most worthwhile, and one being don't bother, here's my switchability index:

Mortgage Protection: also called 'decreasing term assurance', it's tied to your mortgage loan, dropping steadily in benefit as your loan does. It's the cheapest form of cover since it only pays off your mortgage, and will be finished long before you reach old age. But you'll need your bank's permission to switch it and a legal assignment form to attach it to your mortgage. Switchability Index: 2

Term Insurance: this can be bought as a stand-alone product or as part of a pension. It pays out if you die within a specified period, e.g. before age 65, or 25 years, for example. The cover remains the same, rather than decreasing, so it's a little more expensive than mortgage protection, but runs out at some point.

It's helpful to have when you have large outgoings, such as a mortgage, children and need income replacement for your family. However, once you retire, you may not need it at all. If you have one of these for more than five years, it's too expensive. Switchability Index: 9

Whole of Life: this lasts all of your life, so the payout is effectively guaranteed. This makes it more expensive, and it is normally 'reviewed' every 10 years or so (perhaps every five years or less, after 65), to make sure the premium still covers the insurance. Worth switching unless your health is impaired. Switchability Index: 8

Accidental Death Benefit: this is an add-on to another policy, paying out double the cover if you die as the result of an accident. It carries an extra premium. Switchability Index: 6

Serious Illness: this pays out, not when you die, but if you contract a life-limiting illness, such as heart attack or cancer. It is expensive, depending on your age and state of health, but many people find it invaluable knowing they could stop work and tend their illness if they had to. If you're well and healthy, it's worth getting re-quoted. Switchability Index: 7

Warning

When switching life insurance it's vital to keep old cover in place until the new one is secured, so you don't lose valuable benefits.

How to switch... Life insurance

STEP 1 Find out what cover you have, how much you’re paying and who it is with.

STEP 2 Call a broker to get re-quoted for all policies.

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STEP 3 Complete an application form and medical tests/reports if required.

STEP 4 Only when new cover is in place should you cancel the original policy.


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