Life Assurance is a topic that no one wants to talk about but is something that almost everyone has to pay for at some time in your life.
In Ireland there are 6 Life Assurance companies Aviva,Friends First,Irish Life,New Ireland,Royal London & Zurich Life.
You can either go directly to the insurance company or use a broker when purchasing life assurance. Often brokers can offer discounts that you wouldn’t get if you went directly to the insurance company and they can also compare different insurance companies for you.
It is important to be aware of what type of broker you are dealing with as this will affect the products they can offer you.
- Tied agents who advise and sell products from a financial services firm they are tied to. All the Irish Banks are tied agents of Irish Life except for Bank of Ireland that is a tied agent of New Ireland Insurance. This affects the competitiveness of the quotes for life assurance you will receive from these tied agents
- Multi-agency intermediaries, advise on and sell products from a number of different insurance companies. Some will compare the whole market and find you the most competitive quote between all 6 providers.
Below are 3 of the main reasons for buying life assurance and the types of life assurance you will need.
Main Reasons for buying Life Assurance
- Buying your own home – Mortgage Protection.
- Starting a family – Life Assurance.
- Becoming self-employed – Income Protection.
Buying your own home – Mortgage Protection
When you buy your own home most people will go to the bank for a mortgage in order to afford the home – one of the banks conditions of getting a mortgage will be that you have taken out an adequate mortgage protection policy.
Mortgage protection is a life assurance policy that will pay off the mortgage outstanding on your home if you die before you have paid off the mortgage. So if you die with €100k left on your mortgage – the policy will pay the €100k directly to the bank.
When getting a mortgage the bank will try to sell you mortgage protection however there is nothing stopping you from buying mortgage protection from a different provider – often this is the cheaper and better option as banks in Ireland don’t compare the market for you only offer products from a single provider such as Irish Life. Independent financial advisors are able to compare market for you for cheaper more flexible policies than offered by your bank.
Starting a family– Life Assurance
Having your first child is often the main reason why people start considering taking out life assurance policies – so that their family is looked after if anything should happen to the parents.
Life assurance provides a lump sum for your dependents if you die which can be used for many reasons such to provide an income for when you’re gone or to pay for college fees etc.
The cost of life assurance will depend on the type of policy you choose, the amount you choose and the term of the policy. Other factors that will affect the cost will be your age, health & personal circumstances.
Becoming self-employed – Income Protection
Becoming self-employed is a big step and you need to consider what will happen if you are unable to work. In Ireland the self-employed are not entitled to anything if they cannot work due to health reasons unlike PAYE workers who are entitled to social welfare disability benefits.
Income protection will pay you up to 75% of your income if you can’t work due to illness or disability. It will start paying out once you have been out of work for a certain amount of time – the amount of time will depend on the policy you take out.
Tax relief is also available on the cost of income protection policies at the highest rate of tax you pay so this will lower the cost.