Is Your Family Properly Protected?
Over the last number of years we’ve witnessed an extraordinary change to the state of our economy.
Throughout the country 445,000 people are now out of work and furthermore, many people’s salaries have been dramatically reduced. So it’s probably fair to say, that not many of you will have gone unscathed by the current economic downturn.
As a result we’ve seen a seismic shift in people’s attitude towards their personal finances. Gone are the days of care free spending and in its place households across the country, especially those with young families, are cutting back on any additional spend.
Indeed an exceptional amount of focus has been placed on the financial security of the family – saving where we can and making every cent spent count – and understandably so.
Ensuring that you’ve something put away for a ‘rainy day’ or any unforeseen circumstances, such as today’s all too common redundancies, could well be the top of your list. This is a prudent approach and one to be encouraged at any time in the economic cycle. But have you considered what might happen to the financial security of your family if, you had a serious accident, became critically ill or in worst circumstance, you were no longer there to support them at all?
Although uncomfortable to consider, the unfortunate truth is that the serious illness or death of a parent can be more common than often thought.
And unfortunately far too frequently, as some families have also had little or indeed no family protection in place,they left their family with no financial lifeline, meaning many may struggle to pay for even basic everyday expenses.
In fact, a recent study by Life Assurance specialist Caledonian Life showed that even today, young families are still massively underinsured. The study also found that the typical level of Life Assurance cover in an Irish household is not enough to adequately sustain a family in the longer term, even if they had their mortgage cleared through a basic mortgage protection policy (reducing term life cover) as the following example illustrates:
Couple aged 36 and 37
2 dependent young children, ages 3 & 1
Cover in Place; €300,000
Monthly out goings after mortgage cleared: €3,000
Cover will last: 9 years and 1 month
* These values assume the life assurance policy payout is invested returning a growth of 4% per annum after tax, that the monthly income needed increases by 2% per annum and that the first monthly income is taken after one month.
These values are for illustration purposes only. All application for life assurance cover are subject to underwriting requirements.
You might look at the above example and wonder how this amount of cover is not enough? Indeed, there’s no disputing that €300,000 is a great deal of money.
However, when you break it down you’ll find that with their current monthly expenses, which will undoubtedly increase as their children grow, that this amount of cover will only last for nine years and one month, at which time the payments would then cease. What will the two young children, then aged 10 and 8 do with no financial security? Worse still, what would they do if there had been no cover at all?
If this example demonstrates anything, it’s that overlooking a critical financial area such as your Life Assurance needs is not the solution to your family’s finances. In fact, by making these short-term savings today by not having cover in place, you could actually be jeopardising your family’s future financial security.
Indeed, this lack of Life Assurance has been quite a concern for those in the Irish Insurance industry for some time; with many doing all they can to stress its importance. Commenting on the matter Elizabeth O’Gorman, Financial Advisor and Director of Onequote.ie – one of Ireland’s leading financial solution providers – said, “The reality is that this small amount of savings in your day-to-day expenses by not having cover in place, is not going to alleviate the financial strain that will fall upon a family if the main breadwinner were to fall seriously ill or die, leaving little or no financial protection for them at all. While, those with cover in place, should ensure that it is both adequate and cost competitive. This can easily be done by visiting our website, www.onequote.ie.’’
Thankfully when it comes to Life Assurance policies and planning for the future Ken advises that there are a number of options available on the market. Furthermore he says that the market has rarely seen such good value for money and that reviewing your cover now could offer you very substantial savings over the course of your policy. For example, a 30 year old male, non-smoker could today, obtain €500,000 worth of life cover over a 20 year period, for a monthly premium of as little €7.20 per week.**
Life Assurance for the family
For those of you with young children, a Term Assurance policy such as a Level-term or a Convertible-term Assurance policy will allow you to best secure your family’s needs should you die unexpectedly.
Term Assurance pays out a fixed, tax-free lump sum whether you die on the first or last day of your policy, in return for a fixed premium. The benefit here is that a fixed premium will allow you to budget over the longer term and therefore involves no nasty surprises at the end of the month.
When taking out a Term Assurance policy you will need to decide on the level of cover you require and the length of time you will need it. It’s always best to discuss this with your financial advisor. They can assess your individual circumstances, including your monthly expenses as well as your earnings, and recommend a suitable level of cover for you.
As already highlighted, a common problem with Life Assurance is that it is often left quite late to enforce and unfortunately, the older you are the more expensive it will be. On when to take out a Life Assurance policy Ken advises to do it sooner rather than later. “This is advisable, especially to those with young children. Not only will this offer you peace of mind but it’s also better to get this kind of cover when you’re young and have a clean bill of health.’’
Finally, for those with cover already in place he says, “…the focus should be on reviewing your cover, if your circumstances change. What may have been adequate cover when you first took out your policy may no longer be sufficient to support your family’s changing needs.”
So whether you have cover in place already or no cover at all, now could be the perfect time to speak to your Financial Advisor – you may realise that you seriously need to review your cover – or you may be reassured to see just how well your family will be provided for.
If you’d like to discuss your family protection needs you can contact Onequote.ie directly on Low Call: 1890 727 111 or email: info@onequote.ie.
Onequote.ie is committed to searching the market to find the best value Life Assurance options available to meet your needs and the needs of your family.
Providing instant online quotations as well as free protection advice they can also review your existing Life Assurance arrangements, to ensure that you’re getting the best value and service.
**www.bestadvice.ie
http://onequote.ie/life_insurance.php