Written by Planalife based in Athlone, Co.Westmeath.
It is a conversation most of us would prefer not to have, but if you have a significant other and/or children in your life, it’s worth taking the time to consider how they will be protected financially if you die.
Is it a case whereby you have no cover in place, or maybe you have some but you don’t know if it’s enough. How do you know what you might need? I’ve outlined some simple tips below to help guide you on how much life insurance you actually need.
- How long do you need cover – If you have children, you will likely want to have cover until they are independent. Many people now look to have cover in place until their children are in their mid-20s. So, if you have two children under the age of five, this means you may be looking at a term of 20 years. If they are closer to 15 on the other hand, a term of 10 years may be sufficient.
- Consider your needs – Take a little bit of time to work out your monthly expenses – bear in mind these may increase in future years with college fees etc – and multiply these by the years of cover you will need. You might be surprised by the outcome. A €250,000 payout for a family with monthly bills of €3,000, for example, would last for around seven years.
Renting v paying a mortgage; With growing numbers renting, it is important to bear in mind that people can expect to have ongoing rental costs. This is unlike when people own a property as most people will have mortgage protection life insurance to cover the sum borrowed. The proceeds from this type of policy will clear any outstanding mortgage when an owner dies, meaning one less financial worry for those left behind. Unfortunately renters don’t often have the same type of cover in place so if you expect to be renting long-term, make sure you factor the cost of this into your sums.
One parent not working; Clearly, in such a scenario, if the breadwinner wanted to continue to work, he or she would have considerable childcare/ housekeeping expenses. While your property may be mortgage-free thanks to mortgage protection, these additional expenses should still be considered.
- What you can afford – While taking the above into account, it has to be affordable. Simple term life insurance doesn’t have to be expensive. For example, a 35-year-old non-smoker can take out €250,000 of cover for a 20-year term for a cost of €20.88 per month. Several life companies are offering discounts at the moment which could reduce that premium further. If you put it into perspective, it’s the cost of two coffees per week.
Cover can get expensive when you add specified illness cover. Again we find that it is important to try and stay within a budget, you don’t want to commit to a policy you cannot afford and end up cancelling after a few months.
- Shop around for the best deals
While price is important it should not be the only factor you take into consideration as there are often very valuable benefits included in life insurance policies. That’s where I hope we can help. We have agencies with all the major life companies and can advise you on the most suitable policy for you and your family.
