Welcome to the Financial Column in association with award winning Financial Services company Money Plus.
Q. I am a married man, aged 38, with 3 children aged 8,5 and 3. My wife is aged 34. We are both non-smokers and in good health. We are both employees. The only existing life insurance that we have is a mortgage protection life policy to protect our mortgage. This policy has 18 years left.
What amount of life insurance should my wife and myself have to protect our family in the event of the death of either or both of us, and how much would this cost ?
A. This is a very important and relevant question, particularly for parents with young children. To put it in context – recent research carried out by Irish Life found that over half a million parents with children under 17 have no life insurance at all.
So how much life cover should you have and how much will this cost? As a general rule of thumb – the standard recommendation is to have life insurance of about 10 times your net after tax wages.
We recommend that, generally, the most suitable is level term life insurance at a minimum, preferably with a conversion option, and that, in the above circumstances, this is done on a dual life basis. We also recommend that such life cover is put in place until your youngest child is at least 21 years of age, and preferably until they are 25 years old to cover 3rd level education needs. The inclusion of a conversion option, for a small additional cost, provides you with the option to convert a new life policy during the term of the existing policy, at rates based on the same medical history existing when taking out the original life policy.
Level Term life insurance means that you have an amount of life cover, i.e. €300,000, and that this amount remains the same for the term of the policy. If taken out on dual life basis, this means that there is life cover of €300,000 on each life. Therefore if both of you were to die, the life policy pays out a sum of €300,000 on the 1st life and an additional €300,000 on the 2nd life.
In general the cost of life insurance has fallen over the last number of years, principally due to the fact that we’re living longer and enjoy better health. There is also increased competition between the different life companies for your business. The younger you are when taking out life insurance, the cheaper the premiums.
While the question above refers to life cover only, what would happen if you were to get a serious illness or suffer an accident which prevented you from earning an income?
This could have serious implications on your financial circumstances. Based on their claims history, the life insurance companies tell us that you are much more likely to suffer a serious illness or accident than you are to die.
As financial advisers, we strongly recommend considering having (some) serious illness cover in place in addition to life cover (or income protection, if appropriate).
If you would like a quote for life or illness insurance please call Belinda McCauley on 071 9194000 or 086 7847827
For advice on protecting your family and yourself and other aspects of financial planning please consult Belinda McCauley at Money Plus, your local independent financial broker. Belinda and her colleagues at Money Plus, Bridge St, Boyle would be delighted to help you. Belinda can be contacted at 071-9194000/ 086-7847827 or by email: [email protected]