Life insurance, income protection and business protection can get complicated, but truth be told, many of us have the same questions.  Moneycube is here to help with our FAQ!

From the benefits of life assurance, to protecting your business and your family, and everything in between, here’s Moneycube’s rundown of everything you ever wanted to know about life assurance in Ireland… but were afraid to ask.

Got a question to add?  Email us and we’ll add it to the list!  Got an enquiry? Get in touch here.

What is life assurance?

Life assurance is a financial product which pays tax-free money to a beneficiary (such as a spouse or your estate) in the event of your death. It typically involves you paying a monthly amount by direct debit to a life assurance company in exchange for a lump sum in the event of your death.

Life assurance vs life insurance: what’s the difference?

They’re basically the same.  Technically, life assurance is a life-long benefit that will pay when you die, whereas life insurance will only pay if you die within a fixed period – for example, up to retirement age.  In practice, fixed-term life insurance is often cheaper because these are the years when people around you may depend on you financially.

Do I need life assurance?

It depends. The key question is, does someone depend on you financially? If yes, you should almost certainly put some protection in place. And remember, life assurance isn’t just for those earning a salary.  If you’re a stay-at-home parent, for example, it’s an important protection to consider.

There are some exceptions, of course. For example, you might get life assurance (aka death-in-service benefit) through your work. Or if you are single and have no dependents, you might feel life assurance is unnecessary.

How much does life assurance cost? 

The cost of life assurance can vary greatly based on your age, length of time covered, smoking status and health, and the amount of cover you’re looking for. It’s possible to put in place a meaningful level of protection for your financial dependents for relatively modest amounts.  For example, a 35-year-old non-smoker can get cover worth €250,000 for 20 years for around €20 per month.

When should you get life insurance?

There’s no right answer to this one, but in general, if someone is depending on your income and wealth (for example a child), you should strongly consider putting some life insurance protection in place. What’s more, life insurance is cheaper when you are young and when you are in good health: so there’s an opportunity to lock in a lower cost when you set up life assurance at an early stage.

How is life assurance paid out?

Life assurance can be configured in different ways to suit your situation and your budget. For example, you can put fixed term insurance in place, maybe to cover you until your children grow up. Or you can also get whole-of-life cover which will pay whenever you die. You can also insure for the benefit to be paid as monthly income rather than as a lump sum.

Can I get insurance if I have been ill?

Yes, it’s possible to cover yourself even if you have a pre-existing medical condition. You may find that an insurer will either charge you more for the privilege however. You might also find they look into your medical situation in more depth, for example by writing to your GP (with your permission).

What is term life insurance?

Term life insurance is insurance cover which pays out if you die within a fixed period, agreed at the start of the cover.  Often, term life insurance comes with the option for extension at the end of the term, without the need for additional underwriting.

What is underwriting in life assurance?

Underwriting is the work life assurance companies do to assess a risk they are considering insuring, and decide on whether they will accept the case, and at what cost. For life assurance, the underwriting process will typically consider factors such as age, occupation and health status, which affect the probability of a claim.

What is income protection?

Income protection, or permanent health insurance, is insurance which replaces your income in the event that you cannot work due to illness or accident. Normally, it kicks in after you have been out of work for 3, 6 or 12 months, and pays until you are able to return to work. You can generally cover up to 75% of your income.

How does income protection work?

With income protection insurance, you pay a tax-deductible monthly premium while you’re working. If you become unable to work, after an agreed period, your insurer will provide a monthly income. You can typically make multiple claims if you return to work but are forced to leave again.

Do I need income protection?

Ask yourself: is someone dependent on your income? Generally, the answer is yes – even if it’s only you. What would happen financially if you were unable to work due to illness? You’d still need an income – and those around you might need it as well. Income protection, aka permanent health insurance, provides that cover.

Income protection vs permanent health insurance: what’s the difference?

It sometimes seems like the life assurance industry has two names for everything.  These two terms are used interchangeably.

How much income protection should you get?

The answer to this question is a mix of affordability, need, and the maximum achievable. No insurer will provide income protection to insure more than 75% of your income in the event of an illness, for a simple reason: it provides no incentive to go to work!

But you may not need to max out income protection in any case – and this can reduce the cost. Consider what your costs would look like in the event you weren’t working.

Agreeing a longer period off work before you can claim will also reduce the cost of income protection insurance. It can be as long as a year. Clearly, from an insurer’s perspective, they are much less likely to have to pay out in this situation, as many people will return to work before making a claim.

What is mortgage protection insurance and do I need it?

Mortgage protection is insurance which pays out if you die during the period of your mortgage. Technically, it’s known as reducing term assurance, as the amount insured reduces over time, approximately in line with your mortgage repayments. Mortgage protection is a legal requirement in Ireland in order to get a mortgage for your main house.

What’s more, it’s a very sensible piece of cover to make sure that your house is debt-free in the event of your death.

Do I need business protection?

If you have spent time building up value in a business, it’s almost certainly prudent to protect its value using insurance. There are several questions. How would the business would continue if certain key people were gone: you may need life cover or key person insurance. Consider the shareholders and what would happen if one of them died: you may need shareholder protection so you can buy back the shares. Lastly, consider if a group life insurance/ death-in-service policy would be worthwhile.

Do I need key person/ key man insurance?

Key person insurance pays out in the event that a named staff member, who is considered vital to the business, dies. The insurance provides funds which could be used, for example, to recruit a replacement, or even pay off a loan they had guaranteed personally. As with all insurance, running through the what-ifs will help you decide if you need key person insurance.

What’s shareholder protection, and do I need it?

Shareholder protection, also known as co director insurance or partnership insurance, is designed to release a lump sum on the death of a shareholder or partner. That lump sum – which could go direct to the other shareholders or partners, or could go to the company – can be used to buy the dead person’s equity holding.

The key benefit is that the remaining shareholders or partners retain control of the business, while the estate of the dead person receives liquid funds rather than an illiquid stake in a business.