There is a lot written about this subject and in most cases you are left more confused than ever. So here is my attempt to make it easy to understand.
Life cover in its simplest terms is a lump sum payment in the event of your death. Yes you have to die in order for the benefit to be paid out. This payment goes to your family or your next of kin.
For most people the first time that they have to consider life cover in when they are applying for a mortgage. This is Called Mortgage Protection Cover.
What is Mortgage Protection?
Your will not get a mortgage with any of the banks in this country when buying your private residence without having a Mortgage protection cover. This simply means that you take out life cover for the amount you are borrowing over the term of the mortgage. So in other words if you have been approved for a mortgage of say €300k over 30 years, you have a life cover policy for €300k over 30 years and this cover reduces as your mortgage debt reduces so that there is always just enough cover to pay off the remaining debt at any given time.
Personal Life Cover
This life cover policy has nothing to do with Mortgages but everything to do with your family.
If/when you die your potential to earn money and therefore provide for your surviving family is gone. This sounds obvious but its amazing how many people never think of it this way until it is pointed out. Therefore the idea of life cover is to replace that forever lost income and give it to your family in order to help them pay for everyday bills like groceries, utility bills, education fees, basically maintain a decent standard of living. You can have your life cover as……a Term plan or a whole of life plan.
This simply means that your policy can cover you either until you die…ie covers you for the rest of your life (whole of life) or for a specific period of time…ie (Term plan). Now most people at this stage would say ….of course a whole of life is the plan that I want. However the most popular plan in Ireland is a Term plan and the reason for that comes down to cost per month.
What I say is that there is a life cover policy for a needs and budgets, that is why it is so important to discuss your options with a broker in order to choose the plan that suits your circumstances best.
There are other benefits that you can add to your life cover plan, but that is for another day. My object here with this blog is to make life cover options simple…..I hope I have helped you in this regard.