Expert advice on choosing the right life assurance for you

Many people do not have appropriate life assurance, leaving their families vulnerable. Life assurance is primarily meant for family protection, providing financial support to surviving dependents in case of the policyholder’s death. A recent survey found that just 50% of IMAGE readers do not have any life assurance, which indicates a significant gap in financial protection planning.

Some people pay for coverage they don’t need, while others need it and don’t have it. Some people are significantly over-insured, whilst others are significantly under-insured. Some are paying the total cost for certain policies when they could have an equivalent policy which offers some tax relief. Professional financial advice is needed, and regular reviews are strongly encouraged.

1. Types of life assurance

Ireland’s most common type of life assurance is ‘Decreasing Life Cover’ or ‘Mortgage Protection’, primarily intended to clear a mortgage upon the policyholder’s death. While essential for mortgage protection, exploring other life assurance types is vital to ensure your family’s needs are fully covered beyond just mortgage debt.

2. Do you need life cover?

Before opting for additional life cover, other than a plan which simply covers your mortgage, it’s crucial to consider if it’s necessary. Ask yourself: “Would my death financially ruin my loved ones?” If the answer is yes, then life cover might be essential. If no, or not applicable, you might not need additional coverage.

Remember to think ahead, as premiums become more expensive with age, and changes in health can impact your ability to obtain coverage later in life.

3. How to save on premiums

Reviewing existing coverage with a financial advisor can reveal opportunities for cost savings and prevent overpayment. Advisors assess current assets, such as workplace ‘Death in Service’ policies (typically paid out as a lump sum on death), savings, investments and pensions, to determine if additional cover is needed.

Life cover can be surprisingly affordable; for example, a couple aged 35 could secure €200,000 each over 25 years for around €25 per month. That’s €5.80 a week – less than the price of a pint or glass of wine. Costs vary, but quitting smoking or reviewing policies could reduce premiums for potential savings.

4. Understanding life assurance terms and options

Navigating life assurance options can be daunting due to the various terms and types of coverage. Understanding options like decreasing cover, indexation, conversion options and Section 72 Plans for inheritance tax purposes is crucial. An impartial broker can help you understand these terms and assess their relevance to your situation, ensuring you make informed decisions.

5. Consider living benefits

While life cover is designed as a death benefit, don’t overlook living benefits like Income Protection. These are vital for protecting your income if illness or injury prevents you from working. For instance, income protection policies often offer tax relief on premiums, making them a smart choice for comprehensive financial protection if your employer does not already provide them.

6. Seek professional financial advice

Professional financial advice is key to ensuring your life assurance meets your needs without overpaying or leaving gaps. Advisors assess your total financial picture helping you evaluate your existing financial situation, including workplace ‘Death in Service’ policies, savings, investments and pension pots, to see if you already have the right coverage. This can prevent over-insurance or under-insurance and ensure that additional life cover is necessary.

David Looney: Senior Financial Advisor, Alpha Wealth is a qualified and experienced financial advisor with an extensive knowledge of financial services, alphawealth.ie