Which Life Insurance is Best?
To ask what life insurance is best is a tricky question to answer as everyone’s needs are different. For the majority of us we want to spend our money on holidays and trips to the zoo or on having a few drinks on Friday night. With his in mind, I am going to take it that for the vast majority of us we are not looking to spend a fortune on life insurance. So, this article will outline which life insurance is the best value for money. The plans I am discussing are family protection plans. The article will show you how to structure your plan in order to maximize the benefits to the fullest while spending the least amount of money possible to attain these benefits.
Let’s talk about the benefits!
Life Insurance Only
Life Insurance can be paid out as a lump sum (either on a level basis or a decreasing basis) or as a monthly income. For me I like decreasing term and monthly income benefit the most for saving money and value. It matches the need perfectly (the payout reduces as your needs reduces. Why do your needs reduce I hear you say? It’s because your children are getting older and becoming more financially independent.)
The price difference between comparatively the same amount of cover for monthly income on death and decreasing term cover is approximately the same (tends to be a couple of euro in the difference based on non-smokers aged 35). For life insurance only my personal preference is as follows:
My preference for Life Insurance Only plans:
1) Convertible Decreasing term cover
2) Monthly Income on death
3) Level term cover
If you like decreasing term or level term cover, make sure you have convertible cover as this will allow you to extend your plan without medical evidence.
Additional Benefits
Additional benefits include specified serious illness cover, Hospital cash and personal accident cover. For people in high-risk occupations who can’t get Income protection, hospital cash and personal accident cover are great to have. Otherwise, they will increase the cost of your cover substantially because you are more likely to claim hospital cash or personal accident cover than you are to die during the term of your plan.
For specified serious illness cover I would recommend you limit the cover not to two times salary which you will hear a lot of people say but to either €50,000 or €30,000. Why? It’s because these figures maximize your value for money for the following three reasons.
1)Specified Serious illness plans come with a heap of partial payments. Partial payments are restricted to €15,000 or half of your cover whichever is lower. What this means is that if you have €30,000 worth of cover and you make a claim and it’s a partial claim, you will receive €15,000. So, for anyone that is paying for €100,000 and they make a claim they might only get €15,000.
2) Children’s payouts under specified serious illness cover are restricted to €25,000 or half of your cover. Whichever is lowest. This means that having €50,000 worth of cover maximizes the children’s benefits.
3) Most of the life insurance companies do not reduce your main benefit if you make a partial claim. This means that you could still potentially get more than the €30,000 or €50,000 that you are covered for. For example, if you had €50,000 worth of cover and made a partial claim for carcinoma in situ you would receive €15,000. If you then subsequently the following year had a heart attack you can potentially claim €50,000. So, while you were covered for €50,000 your plan would have paid you €65,000.
Just on the above Aviva have the best partial payouts in terms of money. They will pay €20,000 unlike everyone else who pays €15,000 so with them €40,000 maximizes the partial payments.
Massively important is to never ever arrange specified serious illness on a standalone basis if you want value for money. The banks often do this. You should arrange it as an accelerated benefit. What does that even mean I hear you say?
Standalone means that if you had cover of €100,000 and standalone specified serious illness of €30,000 you have two separate pots. So, if you get cancer, they give you €30,000 and then if you subsequently die your family get €100,000.
Accelerated is different. Anybody working for the bank reading this, read carefully and stop giving standalone cover for the following reasons.
If you arrange it as accelerated you can increase the life insurance cover by €30,000 in the above example for the same cost.
So now you have €130,000 life cover with accelerated specified serious illness cover of €30,000 for the same price.
So, if you get cancer, you get your €30,000 and your life cover then reduces to €100,000. If you then die your family get €100,000.
The main benefit of arranging it this way is what if I just died suddenly and did not get sick? With serious illness claims you need to be alive for two weeks after you get sick. So, if you had a heart attack and died under Standalone cover your family would only be entitled to €100,000. However, under the accelerated plan your family get €130,000. What’s mad is sometimes it can even be cheaper to arrange the plan under accelerated this way. Normally there’s about a euro in the difference.
My preference for Life Insurance with Additional Benefits:
1) Monthly Income on death (click here for tips on the amount of monthly income cover you should have) with level Life and Accelerated Specified Serious Illness cover of €30,000(€50,000 if have kids)
2) Convertible Decreasing Term with Specified Serious Illness cover of €50,000. Do it as €50,000 because the cover will be decreasing over the term.
And then there is New Ireland’s unique whole of Life Benefit
This is how you turn your plan for a normal life insurance plan into a super value for money plan. This is my favourite plan in the market. It is an additional feature unique to New Ireland.
If set up by your broker correctly you can arrange for the plan to pay your family more money that you pay in premiums over the course of the plan. This is why I like it so much.
You can arrange to essentially get all your benefits for free. Yes, you pay the premiums but your family will get the money back in the end.
Consider this as the way to arrange it. We take two 34 years olds and non-smokers as an example
The plan is Dual life €30,000 life cover with €30,000 accelerated specified serious illness cover with monthly income on death each of €2000per month and whole of life continuation each of €20,000 for a period of 25 years.
The monthly premium is €98.49.
If you both live for 25 years you will have put in €29,547 worth of premiums into the plan.
After 25 years you automatically stop paying the premiums and your plan changes to whole of life of €20,000 each.
This means that the minimum this plan will pay out to your family is €40,000(profit of €10453)
But if the worst happened and either of you died in the early years the plan could potentially payout €4000 per month if you both died in the first 25 years. It would then payout €60,000 on top of this as you both had €30,000 life and specified serious illness cover and it would pay out the €40,000 whole of life benefit. So potential payout is €700,000.
So what’s the best of the best?
The New Ireland whole of life continuation plan is by far the best value for money plan on the whole market in my opinion.
In the end it will come down to what you want to spend. The more extras you have the more the plan will cost. If you are looking for cheap as chips then decreasing term cover and monthly income on death are best value. But if you are looking for a great value family plan then by far the best plan on the market is New Irelands whole of life continuation plan as it will pay your family back more in the end than you put into it as long as your financial advisor structures it the correct way.
I hope you found this article beneficial and if you have any questions in relation to this article you can get in touch by contacting me at sean@financiallife.ie or call me on 015823524 and I will be happy to help.
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