MORTGAGE PROTECTION
This is many peoples first introduction to Life Insurance, as you require a mortgage protection policy if you are taking out a mortgage, all banks require it. In short, it is an insurance policy that will pay off your remaining mortgage if you die. The monthly premiums are set at the beginning and remain the same throughout. It is a relatively cheap form of insurance as the amount that the company has to pay out on death, reduces year on year as your mortgage is reducing.
LIFE INSURANCE
(LEVEL TERM)
Whilst a mortgage protection policy covers the amount you owe on your mortgage, so is decreasing year after year, a Level Term policy gives you a ‘level’ amount of cover. That is, if you take out cover of €250,000, that is what is paid to your family if you die, whether that is in the first year of your policy or the last. It is a little bit more expensive than simple mortgage protection for that reason. You can have a separate life policy, or use it instead of mortgage protection. What will happen in that instance is the policy will pay the bank what is outstanding on the mortgage first, and your family will get the rest.
INCOME PROTECTION
Whilst Mortgage & Level Term insurance cover your family if you die, Income protection is know as a ‘living benefit’, as it insures your income if you were to suffer illness or injury, survive but be unable to work. For most people, their salary from work underpins everything they have. It pays their mortgage, savings, pension, other insurances, as well as groceries, household bills and much more. This means it is especially important where a family is dependent mostly or entirely on one income.
OTHER PROTECTION PRODUCTS
Specified Illness Cover: This is an insurance policy that will pay you a lump sum if you are diagnosed with an illness that is specified on the policy. This lump sum is design to help you pay medical bills or replace income for a short period if you have to take time off work.
Multi Claim Protection Cover: This is a relatively new & emerging product, that is designed to provide a more flexible & affordable cover. Your MCPC policy creates a ‘pot’ of money for the amount of cover you take out. You can then claim % of that pot dependent on what happens. Death would be the full 100%, a serious illness may result in a 10% or 20% payout, more minor issues a 5% pay out. When an amount is paid out, the remaining % is still there to be claimed at a later date if something else occurs.
Whole of Life: where most life insurance policies cover you for the ’term’ of the policy… 10, 20, 30 years, whole of life does what it says on the tin, it provides you with life insurance forever, so long as you are paying the premiums.
Section 72 Whole of Life: These are specific policies designed to help your heirs to pay Inheritance Tax that will arise on an estate left to them. The limit on what a child can inherit tax free is currently limited to €335,000. Anything over that amount is taxed at 33%. That can mean substantial tax liabilities for some. The section 72 policy will cover those costs, without generating further charges.
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