Protecting your family and dependants is just as important as protecting your home or your possessions.
Here explain what life insurance and mortgage protection (a form of life insurance) are, who might need it, how it is arranged and why it’s important to you and your family.
Read our dos and don’ts before buying life insurance.
What is life insurance and do I need it?GETTING STARTED – LIFE INSURANCE
What is Life Insurance?
It is difficult to think about the effect your death would have on those who depend on you. But it is important to plan for their needs and to look at the financial effect your death may have on the people closest to you. A life insurance policy pays your estate an amount of money if you die during the time limit set out in the policy.
Do I need life insurance?
It is important to consider life assurance particularly if:
- Your family or others rely on you for financial support.
- You have loans or debts, such as a mortgage on the family home.
- You act as a guarantor on a mortgage for somebody else.
If you are in a permanent relationship and have dependant children, you may want to consider a joint or dual policy, even if just one of you is earning an income. If your partner is involved in looking after the home and children, their death could lead to extra child minding or housekeeping costs.
A joint policy covers two people on the same policy and could pay out a lump sum benefit if either of you die (joint life cover) or if both of you die (dual life cover) within the term of policy.
You may not need life cover or you may need less cover if:
- No family member or close friend depends on your income.
- You have ‘death-in-service’ benefit through your job or pension plan – this kind of plan pays out a lump sum if you die during your working life.
- Your dependants would be entitled to certain social welfare benefits after your death.
- You have investments or property that could provide an income or be sold for cash.
- You are older and your family is grown up or if your partner is earning an income – in general, the older you are the less life cover you should need.
Why you may need life insurance
Your need for life insuranceYou are single with no dependents
LowYou have a partner but no dependant children
- Clear any debts you may have
- Leave money to a sibling, close relative or friend
MediumYou have a partner and dependant children
- Replace your income and pay off any debts
- Pay for any taxes that might be due on your death
- Provide enough money for your family’s day-to-day needs and your children’s education
- Pay for any taxes that might be due on your death
- Clear any debts or other expenses
How much life cover do I need?
This depends on your life stage. Generally, if you have a young family, you would need a larger lump sum than if your children are older. You will need to consider buying enough insurance to:
- Cover your family’s income needs for as long as necessary.
- Pay off your mortgage on your home and any holiday home or overseas property you may have.
- Pay off short term debts such as credit card balances, term loans and motor finance.
- Cover costs that might arise when your children are older, for example school or college fees.
- Cover costs that may arise from overseas inheritance tax.
How long do I need life cover for?
If you have a young family or plan to have more children, you may need life cover until your youngest child has left school or college. This could mean a term of 20 to 25 years. If your children are older, five or ten years of cover may be enough.
Some whole-of-life policies give you cover for your lifetime so you do not have to decide on a specific term but these policies cost more than those with a set term.
Whole of life policies can not be quoted online, to receive a quotation please call focuslife.ie on: 01 802 23 44.
Additional Cover Options – Critical Illness
CHOOSING PRODUCTS – ADDITIONAL COVER OPTIONS
You may also choose to add critical illness Cover to your to your policy or take out a standalone critical illness plan.
Critical illness insurance / serious illness insurance
Critical illness insurance pays out a tax-free lump sum if you are diagnosed with one of the specific illnesses or disabilities that your policy covers. It is also sometimes called ‘seriuous illness cover’. It is often sold as an extra benefit on a life insurance or mortgage protection policy.
You may want to consider serious illness insurance if:
- You have no other cover for ill health.
- You are not in paid employment, so cannot buy income protection insurance.
- You have a mortgage, personal loans or other debts that you would still have to pay even if you became seriously ill and possibly unable to earn an income.
It is important to realise, when you consider this type of cover, that it would not replace your income if you were out of work because of a long-term illness. This is because some illnesses may be serious enough to prevent you from working full-time but are not covered by serious illness policies. Even where the illness is covered, the policy pays a once-off lump sum and not an ongoing income.
You can claim the benefit on your policy only if the illness you develop is one of the illnesses your policy covers at the time of your claim a medical diagnosis confirms that your illness matches the definition of that illness outlined by the insurance company in your policy terms and conditions you survive for a period after you are diagnosed. This period may be seven or fourteen days, depending on the policy.
You must meet all three conditions to claim your policy benefit.
There are many situations where you may not be covered by your serious illness policy. You will not usually be covered if:
- your illness was judged to be caused by drug or alcohol abuse, a self-inflicted injury or your failure to follow medical advice.
- your illness existed before you applied for insurance and you failed to say this in your application.
- your illness arose because you were involved in dangerous or criminal activities.
- you live outside the ‘territorial limits’ of the policy for a certain number of months of the year. The territorial limits may vary from policy to policy but would usually mean all EU countries.
What is covered in a typical serious illness policy?
Policies vary, but they usually include:
- cover for a number of serious illnesses, listed on your policy, which may include permanent total disablement.
- limited serious illness cover for your children.
- waiting list and overseas surgery benefit.
The list of illnesses covered varies from company to company, but usually includes:
- stroke and heart attack.
- some types of cancer.
- coronary artery disease.
- multiple sclerosis.
- kidney failure.
- motor neurone disease.
- a benign brain tumour.
- severe burns.
Not all policies will cover all the illnesses listed above, or common illness such as angina, back injury and treatable cancers, so check with the provider for details of the illnesses covered before you take out a policy.
1. Permanent total disablement (PTD) is sometimes included in these policies. So, if you become permanently and totally disabled from an illness or condition that is not otherwise covered by the policy, you could claim the serious illness benefit.
There are two types of PTD cover.
- Any-occupation PTD – Any-occupation PTD means you can only claim if you are not able to work at any job. It means you are permanently unable to do many normal daily activities such as walking, lifting, bending, writing or speaking. The risk of claiming for this type of severe disability is low, so it is often included in the standard illness list.
- Own-occupation PTD – Own-occupation PTD means you can claim if you are permanently and totally unable to do your own job. The risk of a claim is higher, so you can expect to pay an extra premium for this type of PTD cover. You may not be able to get this extra cover if your job carries a higher risk of disability, for example, if you are a sports professional.
2. Children’s serious illnesses – Your children may be covered for most of the serious illnesses listed on your policy, and sometimes for other child-related illnesses, such as meningitis. The maximum benefit for a child’s claim depends on the policy, but it is usually no more than 50% of your cover up to a maximum of about €15,000.
3. Waiting list and overseas surgery benefit – This means they pay out part of the serious illness benefit if you are put on a waiting list for certain major types of surgery or if it is essential for you to have major surgery outside of Ireland.
How much does it cost?
For any given amount of cover, serious illness insurance costs more than life insurance. That is because the risk of you getting a serious illness during a given period is higher than the risk of you dying during the same period.
The monthly cost of the insurance depends on many factors, but the most important are:
- the sum assured.
- who the insurance will cover – it could be single cover for yourself or joint cover for yourself and your partner.
- the term of the policy.
Your age, gender, health and family medical history also affect how much you pay for your serious illness insurance. One of the most common ways to buy serious illness cover is to include it as an extra benefit on a life insurance policy or a mortgage protection policy.
We offer Critical Illness cover on two different bases – Accelerated Cover or Independent Cover.
Accelerated – Life Insurance cover with attaching Critical Illness Cover under the one policy.
A Critical Illness claim payment reduces your remaining life cover by that amount i.e. advance payment of Life Cover.
Independent – Critical Illness Cover without any life cover attaching.
Optional extra’s – Indexation and Conversion
CHOOSING PRODUCTS – ADDITIONAL COVER OPTIONS
Convertible term cover
This allows you to convert your level term cover to an alternative life assurance plan without providing additional medical evidence, at any time during your policy term up to the age of 65. For example – Converting from a specified term plan to a whole of life plan.
- Available to all level and convertible term policyholders who are under age 60 when they start their policy.
- Allows you to automatically increase your cover by 5% each year.
- Your premium will increase by an amount equivalent to 5% – 8% per year, to pay for the additional cover.
Here we give you details of the main types of life insurance, including mortgage protection and critical illness insurance. We tell you what’s covered under each type of policy, what you have to pay extra for and what affects your costs when buying a policy.
Term life insurance
This is the simplest and one of the cheapest forms of life insurance. A term life policy gives you a lump sum if you die during the term of the policy.
For example, you might take out a policy on your own life for €100,000 over 10 years. This means if you die within 10 years, the policy pays out €100,000 once someone can give proof of your death. If you don’t die within the term of the policy, no benefit is paid out and the policy ends.
Before you take out term insurance you must decide:
- The amount of cover you want paid out on your death, known as the ‘sum assured’ or ‘policy benefit’.
- How long you want cover for, known as the ‘term’.
These are both then fixed for the life of the policy, as is the premium, or the amount you pay for the policy, unless you buy index-linked insurance.
The standard premium usually covers terminal illness as well as death but check with your provider. This means that the policy will pay out a proportion, usually around 80%, of the policy benefit if you are diagnosed with a terminal illness (this is not the same as serious illness or critical illness cover). The remaining benefit is then paid out once someone can give proof of death.
An advantage of this is that getting most of the benefit in advance could help pay for any medical costs you have. Generally, term policies will not pay out if:
- Your death is caused by a medical condition that you had when you first applied for cover but you did not disclose it.
- Your death is caused by suicide within the first year or two of the policy.
Some insurers offer life policies that insure you for your whole life, or for as long as you want to keep paying premiums. The premium on these policies is higher than with basic term insurance and can increase at regular intervals.
You can decide to pay premiums up to your death or for a specified time, for instance until you are 65. In most cases your insurer will review your premiums and increase them every so often, commonly every 10 years.
Your premiums could increase significantly following this review and you may not be able to afford it. If this happens, you may have to accept a reduction in policy benefits. It’s important to consider this before your decide on this type of policy.
There are various types of whole-of-life policies, but the most common is a unit-linked whole-of-life policy. With this type of policy, the life assurance company invests your premium in a fund.
They manage the fund so that it is expected to grow at a certain rate and to increase in value over time. The fund value is not guaranteed. It may grow by enough to pay for your life insurance throughout your life. Or, in some cases, it may fall short of the amount that is needed to pay for your life insurance. In that case, you may have to pay a higher premium to keep the sum assured at the agreed level.
You can also get a policy where your premium is fixed and your benefit is set at an agreed level. You will generally pay much more throughout the period of cover for this type of fixed-premium whole-of-life policy than for one where the premium is not fixed.
It is important to realise that a whole-of-life policy has ongoing charges, such as yearly charges for managing the investment fund and sometimes monthly charges for handling your premium. These charges have the effect of reducing the value of the policy fund so the amount of any benefit paid out on your death is not guaranteed.
Can I build up savings in my whole-of-life policy?
Even though a whole-of-life policy allows you to build up a cash lump sum over and above what is needed to pay for your life insurance, this usually only happens if the fund performs much better than expected. You will generally find the policy would have little or no cash value at any time.
It is essential to treat whole-of-life insurance as a life insurance policy and not as a savings plan.
Whole of life policies are not available through this website, but can be arranged through contacting us on: 01 802 23 44
Mortgage protection insurance is designed to pay off your mortgage if you die. Your policy runs for the same length of time as your mortgage, and the premium you pay each month depends on the size of your mortgage as well as your age, gender and the state of your health. The premium is fixed for the term of the mortgage.
If you are under 50 when you take out a mortgage for a home you will live in, your lender must make sure you have life insurance to pay off the loan if you die. The main reason for this is to make sure your family home would not have to be sold to pay off the mortgage.
You do not have to take out this insurance if you are over 50 or if your mortgage is on an investment property, but it can be an advantage and some lenders may insist on it as a condition of getting the mortgage.
Your lender can insist you get mortgage protection insurance but you are free to shop around to buy it. You do not have to buy it from your lender. If you die, your insurance company pays the policy benefit direct to your mortgage lender. Your lender uses the amount needed to pay off the mortgage and, if there is any left over, they will pass it to your estate.
If you have a mortgage in your own name only, you would generally look for a mortgage protection policy to cover your own life. If your mortgage is in joint names, your mortgage protection policy will also need to be in joint names. This means that your mortgage is paid off if either one of you dies before the end of the term.
Types of mortgage protection
Generally, your mortgage protection cover reduces from year to year as the amount you owe on your mortgage goes down. This is called ‘reducing term cover’. It is the most common and the cheapest form of life cover.
You can also get a more expensive type of mortgage protection policy, known as a ‘level-term policy’. This gives you the same amount of life cover throughout the mortgage term. It is usually used for an interest-only mortgage or an endowment mortgage where the capital balance owing stays the same until the end of the mortgage term.
But you can use a level-term policy with a traditional decreasing mortgage. It means you will have more life cover than is needed to clear your mortgage at any point in time so the extra benefit is passed on to your dependants if you die.
What happens to your policy if you change your mortgage?
If you borrow extra on your mortgage, or extend the term of the loan, you will usually have to get a new mortgage protection policy. Your new premium is likely to be higher if you want more cover over a longer term and are older.
If you pay off your mortgage earlier than planned, you could:
- cancel your mortgage protection cover and pay no further premiums.
- keep the policy and pay premiums until the original end date.
If you decide to keep the policy, it would no longer need to be used to clear the mortgage. So any remaining benefit would be paid to your dependants if you died before the policy finished. This could be a useful source of extra life cover.
However, you may not have this option if you have taken out mortgage protection through your lender as they will usually close off the policy when your mortgage is cleared.
Do I have to buy mortgage protection insurance from my mortgage lender?
You do not have to take the mortgage protection policy your lender offers you. And your lender cannot refuse you a mortgage just because you don’t accept the policy they recommend.
Most mortgage lenders offer to arrange mortgage protection insurance for you when you apply for a mortgage. They act as an agent of a life insurance company and get commission from them for introducing your policy under their group scheme.
You pay your premiums as part of your mortgage repayment, so this can be convenient for you. However, your lender’s policy may cost you more than if you buy your cover through focuslife.ie.
You may also be more restricted with a lender’s group policy than if you had a separate policy.
Do I need mortgage protection if I already have life insurance?
Mortgage protection is designed to pay off your mortgage if you die, not to provide a cash sum to your dependants. So, you will usually need separate life insurance to provide for a cash lump sum if you have a dependant family.
You can, if you want, use an existing life policy for mortgage protection. To do this, you would have to ‘assign’ the policy to your lender. This means you would agree to give the life insurance benefit to your lender if you died during the term.
Any policy benefit left over after paying off the mortgage goes to your estate. If your total life insurance benefit is used to pay off your mortgage when you die, there will be no cash lump sum available for your dependants. So, it is generally better to have separate mortgage protection and life insurance.
The calculators on this website are based upon calculators built by Irish Life. They are designed to provide guideline indicators for life cover, pension, and
income protection requirements. It is recommended that you speak to your broker before buying any financial product.