Wednesday 13 December 2017

The golden rules of taking out life cover

Greg Dyer

IN my experience, life cover is something that people with families quite naturally don't like to spend much, if any, time thinking about. That's understandable. Who wants to allocate much of their day contemplating their own mortality?

Despite this, those of us with a family will accept that it's necessary to have plans in place to cover the financial implications of the death or serious illness of the family breadwinner.

However, people often underestimate the amount of life cover they need to provide for their family.

Let's take the example of a family who need income of €3,000 a month to meet all their ongoing bills. If you tell them that a life cover payout of €200,000 will only last just under six years, they can often be surprised.

Another interesting anomaly I've noticed over the years is that women over the age of 44 insure themselves for less life cover than men. Women have less than half the amount of life cover in place than men of the same age. What is more worrying is those that have no cover in place at all – often because they think it's unaffordable for them.

If you want to address the gap in (or non-existence of) your life cover, here are three golden rules to follow.

* Don't confuse cover with age

Many people believe that the level of life cover should increase with age. However, the opposite is often true.

Over the years, I have noticed that people often have their highest level of life cover in place later in their life. On first analysis, this would make sense, as they may have more readily available disposable income to spend on life cover.

However, if people give it some consideration, it's clear that a couple in their 30s with a young family have greater expenses and dependencies and therefore a more pressing need for sufficient life cover than a couple approaching retirement with adult children who are no longer dependent upon them.

* Don't forget the stay-at-home mums and dads

Although they work very hard in the home, stay-at-home mums and dads often believe that because there is normally no direct income paid for the jobs they carry out, they therefore don't need life cover. However, this is really not the case. Too few are aware of the monetary value of the work carried out by the person who stays at home to mind the children and, to use the old vernacular, "keep the house", such as cleaning, cooking and so on.

Although it may be an unpleasant thought, in the event of a stay-at-home parent's death or serious illness, significant and often unaffordable costs would be incurred to employ someone to do the typical household jobs.

Those people, through choice or necessity, who stay home to look after their children almost always undervalue the economic worth of the very important and valuable job they do.

* It comes in all rates and sizes

There are thousands of euro worth of savings up for grabs for those consumers who are willing to shop around.

In fact, many companies have special offers available now, which offer additional price discounts. In particular, it pays to shop around for your mortgage protection life cover.

Remember, you are under no obligation to buy the mortgage protection cover offered by your lender.

Greg Dyer is director of Caledonian Life

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