DD Money – Why you probably need life insurance – Donegal Daily

Donegal Daily financial columnist Sean McNulty this week explains life insurance and why we should all consider getting it.

When it comes to managing your personal finances, people really like to set the record straight. It’s just one more thing not to worry about at the moment. One of the most important areas of our personal finances is protection; and above all protect us and our family in the event of (unlikely) death.

I agree, it’s not nice to talk about, but it’s inevitably something we’ll get to at some point. So today I want to see why you probably need life insurance.

Dependents

The first and perhaps most obvious reason is if you are a parent and have children. Children, otherwise known as dependents, depend on you and your income to raise them and for them to survive. So what if you die tomorrow? The income you bring into your household stops, so technically your family suffers a loss of income. When we think of life insurance, we should think of a monthly or annual amount of income that our family will need if you are gone. This money is used to maintain their standard of living. Cover this amount until your children turn 25, an age they can reach independent (although I’m told many don’t 😊 )

Your spouse should be able to continue planning for their retirement and education funds or even such insignificant things as a vacation in the future. Essentially, we don’t want financial hardship to add to the grief. As parents, we have a duty to protect and provide, and life insurance goes a long way to maintaining that, even if the worst should happen.

Personal loans/debts

Other reasons for needing life insurance are to cover any debts you may have. For example, you might have personal loans, auto loans, or credit cards with balances. These don’t disappear if you die; they are passed on to your estate. You don’t want to leave this financial burden on your family members should the worst happen. Having life insurance even if you are young and single is a good idea.

Business loans

You can also consider life insurance if you have taken out a loan to start or expand a business. Even if it is a limited liability company, you can have a personal guarantee against the loan.

Funeral expenses

Another reason you might want life insurance is to cover funeral expenses in the event of your death. Again, this is a financial impact on your family that you may not want to pass on. People usually want €10,000-25,000 set aside for this, just in case. This money can bring some relief to the family in times of pain and anguish.

As mentioned before, it’s pretty easy to put things like this on the finger, but the truth is, we just don’t know what’s to come, so we have to be prepared just in case.

Costs

Life insurance premiums can start at €10 per month and run into the hundreds depending on the level of cover.

Cover Type Options

You have several different options to choose the coverage that is right for you. For instance;

– you could make the payout of a policy remain the same amount for the duration of the policy (term level), or you could have decreasing life cover so that the amount that would be paid out decreases over time time, making your monthly premium cheaper (decreasing life coverage or even mortgage protection can be used without a mortgage).

– You can also have a conversion option integrated into the policy for an additional one or two euros per month. This option will allow you to extend the term of the policy at any time during the term of the policy without having to answer new medical questions. This can be extremely beneficial if your health ever deteriorates in the future. You may no longer be able to purchase life insurance. With the conversion option, you can extend the term of your existing coverage and not have to answer medical questions about the new condition.

– If the cover is for you and your partner, the policy should not stop at the first death. You can continue the cover under what is called the “double life” basis, which means that the policy continues even after the first death and would also be paid out on the second death.

– You can also add a specified health coverage option to a life insurance policy. This option would pay you a tax-free lump sum if you were diagnosed with any of the 53 illnesses listed on the policy. (There are also partial payments for about 40 other illnesses). This type of financial payment can be extremely beneficial in the event of a serious diagnosis.

Pre-existing conditions

A final point to make about life insurance is not to worry if you have pre-existing health conditions. All insurance companies will review all claims, so it is best to seek advice from a financial broker if you are concerned about the impact of a pre-existing condition. I personally see it every day; at least half of all claims I process have a pre-existing condition.

When the application is then subscribed by the insurer, the latter can still accept the application at the standard tariffs. They might increase the monthly premium (loading) because there is additional risk. Or they can exclude that pre-existing illness/condition from any future payments. It is certainly not always a “decline cover”.

Sean McNulty is the founder and managing director of Rethink Money Ltd, a financial advisory firm based in Letterkenny. Sean’s business is a digital-first advisor with bespoke software to help clients better manage their financial needs.

For a free consultation please do not hesitate to contact us at [email protected]

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DD Money – Why You Probably Need Life Insurance was last modified: November 8, 2022 by Sean McNulty

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