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Financial Website Directory Ireland

Life Assurance: The importance of putting an adequate level of cover in place

Author: Colm Kelly
Category: Insurance
Date Added: August 03, 2012 08:43:55 AM
Page Views: 7112

For some strange reason, I have found myself going to more funerals recently. The difference with these recent funerals that I attended was the ages of the deceased. One funeral that I attended recently was of someone who left behind a wife with two children under the age of 3.


Another funeral, the deceased’s wife was not working. I just hoped in these cases that they had put in place adequate levels of cover on themselves.


Life assurance is so simple and easy to put in place and contrary to belief is not expensive.

 

How much cover do you need?

The level of life cover that you need depends on a number of factors:


  1. Level of debt or borrowings e.g. Mortgage, Personal Loans etc.

 

This is the main starting point. We find that most people have life cover on their family home but very little cover in relation to investment properties.

 

It is especially important to put in place some level of life cover on investment properties.

 

The main reason for this is that, from recent experience, most investment properties are in negative equity and the surviving spouse will be taking over the borrowing on these properties.

 

For example, let’s say someone has borrowings of €1m but that the properties are now only worth €500,000, there is a shortfall of €500,000 if that person passed away.

 

If the shortfall of €500,000 was covered at least the surviving spouse would be able to sell the property and as a result would not be burdened with the mortgage debt.


  1. What are your earnings and how are the earnings split between spouses

 

If something happened to you what level of income would your spouse need to support your family?

 

If you earnings are say €60,000 and the mortgage is now cleared and was €1,000 per month or €12,000 annually, the surviving would need approximately an income of €48,000 per annum. We would be able to work out the cost of proving this level of cover for the surviving spouse.


  1. Ages of children

This is another important factor. The younger the children the longer you need the cover for so if your youngest child is Aged 3, then we would recommend that you have cover for approximately 20 years.


  1. Cover for over 50’s

 

Generally speaking, anyone over the age of 50, there family would be more or less reared.

 

For someone over 50, the requirement for life cover would be to make sure the surviving spouse has adequate cover to live on and that funeral expenses are taken care off.

 

You can put in place a policy that provides cover for the rest of your lives and the cost is dependant on your ages and the level of cover you require.

 

How easy is it to put a policy in place?

Once you have agreed on the level of cover and the term of the policy, all that is needed is to complete an application form with full details of your medical history.

 

Once these details have been provided the life company may write to your GP for further information or they could ask you to attend for a medical either with your own GP or with an independent doctor that they have selected.

 

When all the information is back, there will then be thee likely decisions:


  1. Accepted for life cover at standard life assurance rates
  2. Accepted but with a loading, which means that the premium is higher than the standard terms on offer
  3. Declined - your application has been declined for medical reasons

 

For persons over 50 years of age, who have been declined there is still one other avenue open to them. There is an Over 50’s life assurance policy which guarantees you up to €25,000 of cover for the rest of your life. There is no life cover for the first two years and this policy is a fall back option if you cannot get a normal life assurance policy.

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