Can you name the three life events that should make you consider changing life insurance?
Couldn’t be bothered thinking…that’s ok, let me do it for you…
So you’re considering changing life insurance but where do you start?
Ask yourself the following questions
I can’t stress this enough – life insurance exists solely to replace your income when you die.
Because if you’re dead, you can no longer earn a living (unless poltergeists are in demand).
But your family will still need an income to cope financially.
Let’s say you earn €50,000 and you’ll work for 20 more years.
That’s potential earnings of a cool million.
You die, your family lose that potential income.
Life insurance leaves a lump sum of money to replace that income so your family can maintain a decent standard of living.
Compare your current life insurance amount with your potential earnings.
If there’s a big shortfall, you should review your life insurance.
There are two basic types of life insurance.
Don’t be fooled into thinking this is for your own protection.
It was invented to cover your debt to the bank.
You die, your debt to the bank is cleared.
Did you know the bank gets any payout on any serious illness cover on your mortgage protection policy?
As you can see mortgage protection doesn’t protect your family.
If you wan to safeguard your family’s financial future you need life insurance:
This is what I call family protection because it will leave a lump sum of money to your family when you die.
They will use this to replace your monthly pay cheque.
If you have a mortgage and a family, you should have two separate policies – one to cover your debt to the bank, one to protect your family.
From me, this is the most important type of life insurance.
It pays you up to 75% of your income if you can’t work for over 4 weeks.
How long would your savings survive if you were unable to work long term?
What if I told you €50,000 savings would last just 17 months (drawing down €3000 per month)
Do you have savings to fall back on?
If not you need to consider income protection.
A lot of people still buy long-term 35 year policies.
I think this is crazy.
You could go for a more flexible short-term policy that you can extend without having to answer medical questions.
If you put a shorter term life insurance policy in place, you can buy more cover for the same price.
e.g. a €500,000 policy over 10 years would cost the same as a €300,000 policy over 30 years.
You should buy cover until your youngest child reaches 25 so if your youngest is 2, you need a 23 year term life insurance policy.
But always add a rolling conversion option –
this lets you extend your policy as many times as you like without answering any health questions, guaranteeing you can get cover in the future even if your health suffers.
Is it time your life insurance got a spring clean?
Let me know if you need some help or have a question.
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