What is Life Insurance Ireland – A Comprehensive Guide
Life Insurance! “What do I need that for? I don’t plan on dying any time soon” Chuckle Chuckle Chuckle, is a phrase I hear a lot from people. Sadly a lot of us skip the queue in the stairway to heaven. Perhaps I am biased as I work in the industry and deal with talking about protecting families against death day in and day out but to me, you are crazy if you don’t have life insurance.
This article will explore what Life Insurance is available in Ireland.
According to the Irish Times one in two adults don’t have cover at all. This means half a million children in Ireland have parents with no cover. If something happens to the parent that is a disaster for that family. Especially in today’s world where there are so many cohabiting couples which means they are not entitled to the widow’s pension as a support if their partner dies.
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Let’s be honest I think everyone has had a friend or family member that has died young. We all know of someone who has died young. It is a sad truth.
In this article, I am going to talk about Life Insurance in Ireland and how to get properly protected.
In Ireland, the main providers of life insurance are Royal London, Irish Life, Zurich Life, New Ireland, and Aviva. They all have different offerings but the main types of life insurance plans on offer are as follows:
Types of Life Insurance
1)Term Life Insurance
A Lot of people I come across have term life insurance. This would be the most popular type of life insurance in the market. It is especially suited to those who are looking for large sums of cover on a tight budget. It is called term cover as it has an end date which might be in 10,20 or 30 years.
After the end date, you need to extend your cover(hopefully you had a convertible option) if you wish. Royal London has the longest term you can go to in the market at present which is age 91.
There are two main types of term cover, level term which means the cover stays the same throughout the entire term, and decreasing term(also known as mortgage protection cover). Decreasing term is one of the cheapest plans in the market you can get and is an excellent way to get lots of cover when your family’s needs are at the maximum(i.e. when the kids are young).
A good rule of thumb for term cover is to take out a plan until your children have reached financial independence. We normally recommend a term until your youngest child is 25.
2)Whole of Life Insurance
Whole of life cover on the other hand provides cover for the whole of your life. So It will last until the day you die. It is more expensive than term cover per sum insured and this is because it is guaranteed to pay out. A good way to calculate the value for money on this plan is to work out your annual cost and divide this into the sum assured to calculate how many years it would take to save the sum assured if you simply set aside the monthly premium.
A Lot of the time people get into their 100s before they reach the sum assured amount indicating fantastic value for money.
The whole of life is generally used for funeral cover or as a section 72 plan where the proceeds are used to pay an inheritance tax liability.
Term assurance plans can also be used as section 72 but they are not as good as whole of life as you can outlive a term plan and then the dirty inheritance tax issues arise.
Premiums for life insurance
The amount you pay will depend on several factors including your age, smoking status, your health, and obviously the amount of cover and length of the plan you take out. By using a broker you can get the benefit of price matching and discounting.
Brokers can use price matching which is when a life insurance company agrees to match the price of their competitor’s plans. A broker can then add a discount to the price match to get you an even better deal.
Some people are put off by getting life insurance in Ireland as they think they will have to undergo annoying medicals. This is generally not the case for most. Most of the time you can get accepted by answering simple medical questions either on the phone or in person. If the underwriters think it necessary they may request further information from your GP.
Occasionally a medical may be required and in some instances, it may be because of the level of cover you are looking to take out. Sometimes reducing the cover you are taking out can negate the need for a medical so this is worth checking if you are tight for time.
In any case, the medical will be free and you will get peace of mind knowing that you are fit and healthy.
In Ireland, the beneficiary will be your next of kin if you die intestate(without a will). You can choose to put a life insurance in trust which can be useful if you have young kids and are single for example.
You could have a relative act as the trustee and help manage the money for the children while they are young.
Taxation of Life Insurance Plans in Ireland
In Ireland, if you are married the life insurance plan can go to your spouse tax-free. It is important to note that beneficiaries other than your spouse will pay tax on the proceeds unless the plan has been set up under section 72.
For example, children can only inherit €335,000 off a parent and the rest is subject to tax at 33%. Even worse if you have a partner and have the proceeds paid to them they will pay tax on any proceeds above €16,500. Get the ring out I hear you say! A loophole here is to get two lives of other policies, i.e…. John owns Mary’s policy and Mary owns Johns. Mary pays for John’s plan and John pays for Mary’s plan. Done this way you will receive the benefit tax-free.
Most of the providers offer different add ons you can get including specified serious illness cover, Personal Accident cover, and hospital cash. Royal London offers a helping hand for free with all of their plans. Similarly, Aviva offers Avivacare with all of their plans.
Specified Serious Illness
Specified serious illness pays a lump sum if you are diagnosed with one of the illnesses listed by the provider. Typically they will all cover you for things like cancer, heart attack, stroke, Multiple Sclerosis, and Parkinson’s Disease.
Royal London cover the most illnesses in the market at present (100 in total). While Zurich covers you for less their definitions are excellent which makes it easier to make a claim. So when making a claim for serious illness, the illness you have must match the degree of illness in the definitions set by the provider.
For example, some grades of cancer might not be considered serious enough to make a claim. Specified serious illness is great to add to a family plan as it covers the children for free capped at half the parent’s amount or €25,000. Whichever is lower.
So if a parent has €50,000 specified serious illness cover the child is covered for €25,000 for free. Any children you have are covered for this benefit and their pot is separate from the parents.
Personal Accident Cover
Personal accident cover will cover you for an accident if you are unable to work after a period of 14 days. It is payable for up to 52 weeks. Typically you can ensure half of your income per week. The max you can cover with the main providers is €400 per week.
Hospital cash will cover you while you are in hospital. It kicks in after you have been in hospital for 72 hours. It can be a good benefit to add to your plan as children are covered for free if a parent has it. Zurich will cover children for half the parent’s amount capped at €50.
So if the parent has €100 you maximize the children’s benefit.
Some companies offer additional benefits at no extra cost. For example, Royal London offers a helping hand for free. Helping Hand gives you access to free sessions of physiotherapy, massage therapy, grievance counseling, speech and language therapy, and a second medical opinion service.
It covers you, your partner or spouse, and your children. If one person has a Royal London plan the whole family can benefit from an array of free services.
Avivacare is a fantastic benefit offered by Aviva. It gives the policyholder, partner spouse, and children access to Digital GP, Best Doctors, and counseling for free.
Digital GP is a service that allows you to make an appointment with a Dr online. The Dr can write you a prescription to your local pharmacy. They can refer you to see specialists and they can even write you a sick note for work.
Best Doctors Benefit is a panel of €50,000 specialists around the world nominated as being the best by their peers. So it gives you access to cancer specialists, heart specialists, etc. They will talk with your own Drs and recommend the best course of action.
Best Doctors are even available for your parents and partners’ parents and cover pre-existing conditions. So only one person needs to take out cover to protect the whole family.
Sum up Life Insurance in Ireland
As you can see there is a lot more to Life Insurance in Ireland than simply a payout if you die. You need to consider the type of cover you are taking out such as term v whole of life. Then consider the following questions when thinking about additional benefits.
- 1. How would I pay my bills if I became seriously ill and could no longer work?
- 2. If I broke my leg or if I was in hospital for a long period of time will work still pay me?
Whatever you decide to do make sure you can afford the monthly repayments. You will typically need to pay for a long period of time and if you end up cancelling it can be hard to restart with the same level of benefits. So take a plan out that you can comfortably afford to pay.
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