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How to protect your Family’s Future

Most parents’ plans for the future revolve around weekends and school holidays.  It’s a case of who’s going to bring Jack and Emily to football and gymnastics? Where are we going to go this summer? What will I do with the kids during yet another mid-term break?

It is great to be prepared and in the short term we all have our own systems that range from post-it’s on the fridge to the more organised of us that even use whiteboards!

Being prepared for the long term is where the real payoff can come for your family and ensure they are protected financially no matter what.

But preparing for the worst is not part of our daily mind set.  It’s probably no surprise that 500,000 parents in Ireland (45%) have no life insurance or mortgage protection even though a death could leave our families with considerable financial pressure.  When it comes to specified illness cover or income protection the numbers of parents covered are even lower at 18% and 14% respectively.

(source: Irish Life 2016)

Planning for death or a major illness is quite an undertaking.  We rarely discuss it with family or friends and it’s not a likely topic to be trending on twitter or Facebook.  Let’s face it, none of us want to think about it, so the first thing to do is at least understand it. 

What are the different types of life insurance?

Life insurance is a policy that pays out a lump sum when you die so long as you’ve kept up the payments and you die within the term of the policy.  Your family can use the lump sum to pay off the mortgage, settle any debts or use it to replace lost income.

Term life insurance This is one of the most popular plans as it’s cheaper than whole of- life insurance.  This cover pays out your family a lump sum if you die within a certain period of time which is chosen by you, but is usually 20 years.

Decreasing life cover

This is a lump sum paid out if you or anyone covered on the plan dies. Your chosen life cover amount will reduce each year. This is because the length of time you need that level of replacement income for reduces as you get older.

Whole of life insurance Provides cover for the whole of your life and pays your family a lump sum when you die.  It can be used to protect your family from having to pay inheritance tax and can also be used to cover funeral expenses. It is usually the most expensive type of life insurance.

Pension life insurance Another fixed policy that you start before you retire.  It pays your family a lump sum if you die during the term of the plan.  This plan usually costs less than the others because you can claim income tax relief on your payments.

Mortgage life insurance Only pays off your mortgage when you die and is usually a requirement from the banks when you take out a mortgage.  The plan starts when your mortgage does and the cover reduces as the amount you owe on your mortgage goes down.

Other ways to protect your family

Importantly it’s not just in our absence that we can protect our family.  Serious illnesses or an inability to work because of injury or illness are inevitably a part of life for many of us. Though none of us want to consider the consequences, there are at least ways to ensure your family is protected financially in such situations.

Specified illness cover Also known as critical illness or serious illness cover.  This type of insurance will pay you a lump sum if you suffer from any of the specified illnesses covered by your plan.

Income protection provides a replacement income if you cannot work as a result of illness or injury while you are employed. It can be taken out if you are a full-time employee or self-employed. 

Even when you understand all these different types of cover, finding the right options for you and your family still needs careful consideration. For instance, most would assume that only a working parent would need insurance. But there are just shy of 340,000 stay at home parents in Ireland who are estimated to contribute the value of €20,000 to €50,000 to the home depending on the age and number of children in the household.

(source: Glo Health & Irish Life Financial Survey 2016)

Add up the costs of childcare and transportation, possible cooking and cleaning and you’ll soon see the financial value of a stay at home parent. In that instance, term life insurance, specified illness cover or indeed both protections should be considered.

Single parent families can often be the most at risk in the case of death or specified illness as only one parent is financially responsible for their children. In this case it would be important to think about not only Life Insurance, but specified illness cover and income protection too.

Remember with any life insurance cover you must keep up your payments to ensure you stay on cover.

Ultimately no one knows your own situation better than you but to help you consider what option might be best for you and your family we’ve created a Family Protection Planner.  Based on a few simple details you will be able to see what potential cover needs you may have.  We hope you find it helpful.