Life Insurance and Protection

EveryInvestor’s comprehensive guide on everything you need to know about life insurance and protection. Discover some simple ways to cut the costs of this safety net for families.

Have you ever thought about what would happen to your loved ones when you die?

If you’re the breadwinner or your income is significant to your family coping financially, they can end up finding themselves short of finances quickly if you don’t have a solid plan after death.

By taking out life insurance1, you can offer your loved ones a guaranteed cash lump sum or an income for a fixed period to help them cater to expenses in the event of your death. It guarantees a lump sum paid to heirs after the passing on of the policyholder2.

The best life insurance policy can make a substantial difference between your family struggling financially and perhaps moving houses, and managing to pay the mortgage, while also maintaining a standard of living as they come to terms with your death.

That said, here’s a deep dive into life insurance. Read on to discover how it works, what you need to pay attention to, and the types of life insurance policies in the market.

Defining Term Insurance

Term Life is a type of life insurance protection that only lasts for a specific amount of time. The set amount of time can be anywhere from 1 to 30 years. There are two types of term life insurance:

  • Level term insurance3
  • Decreasing term insurance

Level term life insurance is the most popular type, and it practically means that the amount of capital, or death benefit, remains constant throughout the entire term length.

The decreasing term policy, on the other hand, features a decreasing amount of cash, or death benefit, as time passes by. The death benefit decreases every year.

The main features that make up the term insurance quotes are your age, sex, medical condition, and life expectancy. It’s normal for life insurance companies to ask for a medical examination.

So if, for instance, Lisa is a 38-year-old non-smoker in excellent physical condition, then, she’ll quickly obtain a €250,000 policy for €20 to €30 per month for a ten-year term.

If again, Lisa dies during the ten-year term, her heirs will receive the full death benefit of €250,000. Should Lisa pass on after the ten years without renewing her insurance policy, her beneficiaries will receive nothing.

As blunt as they may be, insurance companies have to assess risk before offering you a policy. The older you get, the higher the insurance premium. Younger couples typically desire term life insurance with kids. The young and healthy parents usually get low insurance premiums.

You can use the term life insurance proceeds to replace lost potential income during your working years. It can offer you a safety net for your heirs and also aid in ensuring the family’s financial goals are met—goals like clearing the mortgage, running the family business, and clearing college fees.

What About Protection?

Protection insurance covers you if you can’t toil or hustle anymore for reasons like serious illnesses or injuries. It’s for those who, if they stopped working, wouldn’t be able to survive on savings or sick pay. It’ll payout for as long as you’ll be off work, and you can claim life insurance protection as many times as you wish to while the policy is valid.

Get Life Insurance And Protect Your Family

A life insurance policy safeguards your family from future financial needs and issues. If you want to leave your family protected after your death, you should consider getting covered and seek financial advice for the best coverage!

Whole Life/Permanent Life Insurance

The main difference between the term insurance policy and whole life is that while term insurance lasts for a specified amount of time, the whole life/permanent insurance policy lasts for your entire life, regardless of your current age.

Lifetime Cover Insurance

Due to the lifetime coverage period of this policy, it has higher premium4 payments than term life. Its policy premium payments are typically fixed, and unlike the term life insurance cover, it features a cash value that works as a savings component, and it can accumulate tax-deferred over time.
You can use the whole life insurance policy as an estate planning tool to assist in preserving the wealth you’re planning to transfer to your heirs. There are three forms of whole life insurance: traditional-whole life, universal life, and variable universal life insurance.
It’s the most consistent of all life insurance policies. Its insurance premium remains constant throughout the policy period of your life and is easy to understand. Its only downside is that the initial payments are more costly to compensate for the higher risk later on.

Universal Life is a form of permanent life insurance policy designed to offer you lifetime coverage. It also features an added investment savings element and low premiums like the term life insurance cover. It also provides you with flexibility, so if you want to adjust your premiums and death benefits, things can work comfortably for you.

It’s also true of variable universal life insurance, even though neither of them features the minimum cash value guarantee like the whole life insurance does.

Things You Should Consider When Taking a Life Insurance Policy

There are certain factors you need to ensure you’re careful about when taking out a life insurance policy. It’s all about being prepared and thorough, and here are some of the ‘must-consider’ factors:

1

Adding Cover

As your lifestyle changes, your life insurance policy should change too. It’s crucial to review your policy and ensure that you’re paying a reasonable price for the right amount of cover.

Some popular reasons to change your insurance policy is, having more kids and if your spouse stops working or you take out a new mortgage. You could also decide to decrease your cover if, for instance, your new employer provides you with a better death package.

2

Switching

If you’re young and active, you might find that it’s easy to get a better deal. As you get older, though, it can be daunting trying to switch from one policy to another. However, it’s vital to ensure that you get better, no matter the circumstances.

If you decide to switch, make sure that you don’t cancel your current insurance until your insurer sets up your replacement policy, and you’ve made your first monthly payment. When you cancel a plan, you can’t go back.

3

Term Life Insurance

If you purchase term life insurance, it’s vital to start making plans about your policy before it expires when you’re not ready. So, when it’s about to end, you need to start looking into renewing your insurance policy as you don’t want the insurance cover to come to an end without warning!

4

Death in Service

You might have employee benefits from your firm that includes ‘death in service’ benefits. If you have a substantial package, life insurance might not be a necessity. Nonetheless, as soon as you stop working for that firm or change jobs, you won’t be covered anymore.

5

The Small Print

You must read through the small print before you decide to take out a specific policy so that you can know what it’s about and what it doesn’t cover.

If you’re not sure, you can always ask the insurance provider, the broker, or your financial adviser. The components included can vary massively from one insurer to another. So, it’s essential to read the definitions so you can know you’re comparing similar policies.

Frequently Asked Questions

Everything you need to know about life insurance and protection.

It depends on your age, sex, marital status, hobbies (like extreme sports) if you’re a smoker, your medical condition (including weight and family medical history), and your occupation (some carry higher risk).

You can get them from financial institutions, specialist brokers, independent financial advisers, insurers, credit card companies, insurance comparison sites, retailers like some of the popular supermarkets, and your mortgage provider5.

You mightn’t require income insurance if you can comfortably get by when you’re on sick pay, survive on government benefits, you’re an expert saver and have enough savings to support your lifestyle, you can take early retirement.

Life insurance policies can be of excellent value, and only cost you a few Euros or pence a day to offer you all the security you and your family need.

Premiums vary from one insurer to another, and they’re highly dependent on many elements. The younger and healthier you are, the more affordable your life insurance policy.

The amount an insurance provider may have to pay out depends on if you have any recurring debts, mortgage/rent, the number of dependents you have, and your take-home income.

It depends on your age, occupation, smoker status, the proportion of your income that you want to cover, the waiting period before the policy pays out, the illnesses and injuries you need to be covered, and your health (including your weight and family medical history).

You can live without taking a life insurance policy if you’re single, your spouse earns enough cash for the family to live on, or if you’re on low incomes and qualify for state-entitled benefits.

It’s, however, always advisable to get independent financial advice if you’re not sure.

Insurance providers offer you up to 30 days to change your mind and also to get a full refund.

Contact us about your goals or if you need to chat to a financial adviser.

We focus on creating financial security and building long-term wealth for our clients.