Saturday 17 March 2018

What can life cover do?

What can life cover do for me? For you – aside from peace of mind, it does nothing for you! You will never see the benefit of it.

However, in the event of your death, your family or business will benefit hugely as they will continue to prosper and enjoy the standard of living you are currently working so hard to provide for them.

Your family and your business depend on you and your ability to work and earn an income. Without you, they will both suffer.

It's a sad fact that people do pass away whilst they still have people dependent on them and it's an even sadder fact that sometimes financial difficulties are heaped upon emotional distress. However, proper planning means financial difficulty is eliminated for those you love.

As a parent, guardian, spouse or partner you will no doubt have many people who are depending on you. Sometimes when we are busy with our day to day lives we forget the financial value we bring to our family.

Once you begin to ponder this possibility, very simple questions begin to arise:

- Will the mortgage still need to be paid?

- Even if I have some form of life cover in place to pay off the mortgage, is that enough?

- Will my family have a regular source of income if I am no longer around?

- If my spouse is working and earning an income, would they be in a position to continue working or would they need to give up work to look after our children?

- Could my family survive on social welfare payments?

Once you have identified the need for some form of life assurance, the next question is inevitably, how much should I insure myself for?

Assume for a moment that once your family had spent any possible income they may be in receipt of, be it social welfare or other income, they found they needed another €25,000 per annum to replace your lost income as you have passed away.

Also assume yours is a young family and you were planning on sending your children to college. You could be responsible for your children for the next 20-25 years. That's €25,000 per year x 25 years = €625,000, not even taking into account inflation over that period.

Whilst the above illustration is quite simplistic it may allow you to consider your financial value to your family, and how much they depend on you.

What are the special circumstance for a Business Owner?

Some business owners take the view that in the event of their death their family will at least have the business to use in order to provide an income. Again, questions begin to arise in this respect.

- Will Business Loans still be outstanding?

- Will your family be in a position to run the business to earn an income?

- Will your family have the necessary expertise to run the business?

- What if you family wished to sell the business, is there a market for it now or would there be a market for it in the future?

- If you have a business partner/s, how would they feel about having your family as their new business partner?

Life cover can be used as a vehicle to resolve most of these issues if set up and structured correctly.

The question of whether or not you should have life cover in place is really very simple. Will your family or business suffer financially in the event of your death? If the answer is Yes, you should start exploring your options now.

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