With plenty of insurance companies, plans and benefits, it is overwhelming to know where to start.
While choosing the right type of life insurance can be stressful, it is an important decision.
Here is a rundown of some guidelines that can help you choose the right life insurance cover for your needs.
Understand What Life Insurance Is:
Life insurance is basically a contract between you and your insurer, where you are promised to be paid a designated sum upon your death in exchange for a premium.
The premiums are either paid on a regular basis or as one lump sum. Other expenses such as funeral costs might be included in the benefits.
Life insurance contracts are available as both protection policies and investment policies.
Protection policies are meant to provide a benefit or lump sum payment in the event of death. This is the most common life insurance type in Ireland and other European countries.
Investment policies, on the other hand, help grow your capital as they can be used to make investments in various funds.
Do you Really Need Life Insurance?
Not everyone needs life insurance. Everything depends on your specific circumstances. However, opting for cover could be the right decision if you have a family to look after.
It is also important if you don’t have life insurance benefits through your existing pension plan or job. And if you are over 18 with a steady income, kids or a mortgage, you should definitely consider life insurance.
However, you might not need life insurance if your income doesn’t make up a significant percentage of your family’s entire income.
How Much Life Insurance Cover Do You Need?
Well, it all depends on what you can afford, your requirements and the age of your children.
Generally, a good rule of thumb is to choose a policy that is 5-10 times your annual salary. Although, this depends on various factors like your existing debts and the needs of your dependents. There is no use getting life insurance cover that you cannot afford, as that would just put you under unnecessary financial strain.
If you have two children under the age of six, you might consider a term of 20 years. Then on the other hand, if your children are a lot older, say close to 15, you could consider a shorter term of say 10 years.
Fortunately, many insurance websites have an online life insurance calculator that you can use to estimate the value of life insurance you might need. Alternatively, you can contact an insurance broker to help you determine the right amount of cover that you need.
Which Plan is Right for You?
The main types of policies are life insurance, mortgage protection and income protection. The life insurance category covers whole life cover, variable life cover and universal life cover.
With life insurance cover, you can have peace of mind knowing that your financial dependents will continue to receive an income should you die. This can be very important for working parents with children who are under the age of 18 years.
Although the types of life insurance policies can vary, they usually offer financial protection against death, inability to work and critical illness.
Here’s a quick breakdown of such policies:
Term Life Insurance provides a fixed lump sum should you die within the term (for example 20 years). Although it doesn’t protect you for whole of life, it can be affordable than some other plans.
Life-Long Insurance covers you for your entire life which is why it can be the most expensive type of plan.
Mortgage Life Insurance pays off your mortgage upon your death. It may also provide extra benefits if required.
Pension Life Insurance is generally recommended for people with a retirement plan. It covers you for a certain amount of time chosen by you. Your nominees will get a lump sum should you die during the term of the plan. It can be quite affordable as you can get tax relief on your premiums.
Decreasing Life Cover provides a lump sum amount should you die. However, the life cover amount is decreased each year, making it cheaper than life long and term cover.
What about Discounts?
Ireland has a competitive insurance landscape, leaving plenty of room for discounts. After all, insurance companies are always looking for ways to get new customers.
Therefore, it’s always a good idea to keep an eye out for any new discounts that may be available on life insurance cover. And sometimes the small life insurers offer discounts to compete with larger providers.
Such discounts can help you save money on your life insurance policy, without minimizing the value of your policy.
You can also compare the quotes of several insurers by contacting them directly to negotiate the best rates.
Do you have any Health Issues?
Your insurers will assume you to be in perfect health. So if you have previous or current medical conditions, you might end up paying more than the expected amount.
Therefore, it is vital to truthfully disclose any medical conditions to your insurer.
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