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  • Writer's pictureNiamh De Búrca

"It will never happen to me!"

Life cover - for the majority of people it can be hard to see the value of having life cover in place. Especially when all we see today are the outgoing costs. But life cover genuinely is a financial life saver, for so many people and their families!

We have seen families left financially crippled, with the loss of one income to the household.

There are 5 main life cover providers in Ireland. Using one of these providers only as an example, in 2021 the company paid out €106.5 million in claims to 2534 people. In the charts below life cover (and indeed some serious illness) claims also include those which were taken as security by the bank against a mortgage "mortgage protection".

Looking at the average claim per policy type we see life cover claims at an average of €124k, serious illness claims at just shy of €80K and income protection at an average of €23k per annum.

Picture this - and I hate to ask you to do it, but imagine if either you or your partner were unable to work for an extended period of time due to ill health. This may either put you under financial stress at a time when you least need it, or impact on your longer term goals to say buy a house, or your target pension income. In 2021 the youngest male claimant for income protection with this life company was 22 years old and youngest female claimant for the same cover was 23! Well done them for having cover in place.

The Irish Cancer Society says that approximately 45,000 people each year are diagnosed with Cancer with at least 25,000 of these being invasive. But yet this diagnosis appears to make up only 20% of the claims for income protection in 2021. Extrapolating these figures suggests that c. 125K people each year are diagnosed with an illness that would make continuing to work for a period difficult (c.2.5% of the population).

As we get older we start to feel our mortality a bit more, especially when we introduce additional responsibilities into our lives - partners, dependents. This can be exasperated by direct experience of personal ill health or perhaps those of our friends and peers. At this stage we are unlikely to be as healthy as we once were and start to feel our aches and pains or perhaps have recovered from something ourselves. This results in increased costs even if we do have a perfect bill of health, but in reality many don't!

Here we look at the increase in monthly cost for €250K level term life cover ceasing at age 60. We are not making any recommendations whatsoever in drawing up this illustration - in fact we would rarely suggest that someone needs the same level of life cover at age 60 as they do at age 25. In this example the cost of this cover nearly doubles between the ages of 25 to 45 even though the term to age 60 reduces i.e. the cover is needed for a shorter time.

The right levels of life cover for you need to be specific to your own needs, your own circumstances and what you have available to you already (Caveat: don't rely on benefit from your employer too much unless you plan to be with them until your retirement). Any life cover you put in place also needs to be affordable - but some is better than none!

We have built an app that gives you a high level insight into the levels of life cover that you might need. Don't worry all the information you input on to this app, stays on your local device, unless you choose to share it with us via the app.

Life cover can also be used in very clever ways to continue to protect a family unit in the event of partnership/ marriage break up or indeed protect partners financially in a tax efficient manner.

Any questions we would love to hear from you.....

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