So what is life insurance cover?
Life insurance is a plan that pays out a lump sum to your family after you die. Most life insurance plans are for a fixed period of time and will only pay out if you die during that time period. Whole of life cover is more expensive but will pay out a lump sum whenever you die.
Why should I get life insurance cover?
Life insurance will help protect your family financially after you die, in a number of ways:
1. Pay funeral costs
The average cost for a funeral in Ireland is €4,062₁. However costs can quickly escalate depending for example on where you live, and what type of service you want. There are cars to hire, coffins to buy, death notices to put out in newspapers, flowers and then there’s the burial plot. In Deansgrange Cemetery in South Dublin where spaces are scarce a plot can cost €16,000 to €18,000₂, while in Glasnevin Cemetery, plots cost up to €4,600₃.
(Sources: ₁ The Journal 2016, ₂The Irish Times 2016 ₃The Irish Independent 2013)
2. To replace income
Obviously the loss of a parent’s income will have a very large effect on a young family’s financial wellbeing. A large lump sum from your life insurance cover can help to offset this loss of income. This is not just emergency money or funds to cover the basics but giving your family the financial ability to maintain their standard of living without financial difficulties.
3. Pay off debt
The money your family receive from your life insurance cover can be used to pay off things like car loans, credit card balances and even the mortgage.
4. Peace of mind
Knowing that your family’s financial burden will be lighter in the future because of your life insurance can help give great peace of mind now. Just imagine the peace of mind you could have of knowing you’ve got it all organised now.
Who should get insured?
It’s not just parents who provide an income that should get life insurance. Parents who work full time in the home should also think about a protection plan. Stay-at-home parents in Ireland are estimated to be worth €20,000 to €50,000 a year₄ depending on the number and age of the children in the household. Add up the costs of childcare – remember it’s full-time during school holidays – transport, and all the things such as cooking, cleaning, laundry. You’ll soon realise how much it would cost to pay for all the services a stay-at-home parent provides.
(Source: ₄The Irish Times 2016)
What type of life insurance plans are there?
Decreasing life cover
This pays a lump sum if you or anyone covered on the plan dies. With this type of plan your life cover amount will reduce each year. So the cost of this cover is cheaper than Term or Whole of Life cover. This is often because the cover was chosen to help provide an income for your family - and the number of years you need that level of replacement income for reduces as you get older. The other reason for choosing this type of cover is to provide life insurance for a mortgage – as the amount outstanding on the mortgage tends to reduce over time.
Term life insurance
This pays your family a fixed lump sum if you die within a certain period of time. You choose the period of cover. It’s normally about 20 years. It does not cover you for your whole life and this is why it’s cheaper than whole of life insurance.
Life long insurance
Also known as whole of life Insurance, this type of plan gives life insurance for your whole life. You can use it to protect your family from having to pay inheritance tax when you die. You can also use it to provide cover to pay for funeral expenses. Lifelong insurance is usually the most expensive type of life insurance.
Mortgage life insurance
This type of life insurance pays off your mortgage if you die. You start the plan when your mortgage does and the amount of cover reduces each year as the amount you owe on your mortgage reduces. Mortgage life insurance will only pay off your mortgage if you die – it will not provide any extra benefits unless you have chosen them.
Pension life insurance
This is life insurance you start before you retire. It covers you for a specific amount of time, which you decide. It pays your family a lump sum if you die during the term of the plan. The advantage of pension life insurance over other life insurance plans is that it usually costs less because you can claim income tax relief on your payments. This is a type of life insurance you can organise as part your personal retirement or pension plan.
Remember with any life insurance cover you must keep up your payments to ensure you stay on cover.
See what cover you may need - try our Family Protection Planner
As you can see there’s lots of options. No one knows your own situation better than you.
So to help you consider what option might be best for you and your family, we’ve created a Family Protection Planner. It only takes a few minutes to easily see what potential cover you may need and the price for that cover. We hope you find it helpful.