Bob is 25. He likes to drink pale ale and enjoys taking me-time to moisturise his beard with special oils he buys off the internet.
Bob also really likes Nickelback and Coldplay, but he can’t admit that out loud because it’s not cool. Bob’s been doing some reading and has decided to get his personal finances in order: and top of his list is to look into Life Insurance.
He has considered his options and has decided that Term Life Insurance makes sense. You might be thinking that Bob is a bit mad to be getting Life Insurance at his age, but he’s planning on proposing to his long-term girlfriend, settling down and having kids.
Now, he reckons, is the time to sort it. And he’s not wrong: getting Life Insurance when you’re young could potentially save you a lot of money in the long-term.
Life Insurance (and insurance in general) is all about risk. Essentially, you submit an application form and the insurer considers the chances of you dying while insured. They then set your premium (how much you pay) based on that.
You’ll pay more if you’re a smoker, you’re older, or if your health isn’t the best – because all these things drive up the chances of you dying while insured. You see, the insurers don’t actually want you to die (sound of them). Instead, they want you to outlive your policy so that they collect your premiums without having to actually pay out the insurance.
Now, it’s quite unusual for 25-year-olds to have Life Insurance. Life Insurance is only useful if you have dependents and most people in that bracket are too busy raising pets and plants to consider actual children.
A note: We’re talking here about Term Life Insurance, which means you get insured for a certain length of time. In this instance, once your term is up, you’re no longer covered. The alternative is Whole of Life Insurance, where you’re covered for your whole life. Just like Ronseal, it does exactly what it says on the tin.
Whole of Life is considerably more expensive than Term Life because it’s guaranteed to payout. The insurers will lose their bet that you’ll outlive your policy. In this case, they’ll charge you enough via premiums to still make it worth their while.
Remember: insurance is a business, and its main goal is to make money for its corporate overlords, who may or may not be lizards in suits depending on the conspiracy theories you read online.
Now, there’s a little insurance broker secret trick that will come in very useful here if you’re someone who is considering Term Life Insurance.
It’s called a conversion option and is a way to sneak in under the door so that when your term expires, you’ll be able to renew your policy without answering medical questions.
Let’s look at Bob again.
Bob is 25, and he’s decided he wants to get a 30-year Term Life Insurance policy, which would cover him until he’s 55. He also opts into the conversion option. At 25, Bob is in perfect health with the most lustrous beard you’ll ever see.
At 55, Bob has developed a dodgy heart, and he had a minor stroke in his forties.
If Bob were to disclose this medical information when re-applying for more Life Insurance, these medical issues (and his increasing age) would be a big red flag for the insurers when they process his application.
However, with the conversion option in his back pocket, Bob will be able to get more cover without paying a massive price hike.
So you see: Bob’s being smart. Term Life Insurance + conversion option = <3 <3 <3
Again, Bob is sound and has agreed to be our guinea pig example here.
So Bob fills in his details and requests a quote using lion.ie’s Life Insurance quotemajig. We’ve already established that Bob is a smart guy, and going with a good broker will help him get the best policy for him and his family. We’d also be able to guide him such that he gets great additional benefits with his policy, like Child Cover for his future kids.
So, Bob wants €250,000 cover for 30 years, with a conversion option.
At 25, Bob’s quote is the following:
Irish Life, which is the most expensive, is still only €5 a week – which, you’ll agree, is very affordable.
Now if Bob were to wait until he’s 35 to apply, his price starts to creep up. In this instance, it’s still a 30-year Term for €250,000 with a conversion option.
This time, the numbers are the following, presuming he’s still in perfect health. (If you’re reading this, Bob, don’t worry. Things don’t start to go shitty until later.)
Now, let’s say Bob is very lackadaisical about all of it. Maybe his relationship falls apart, and his missus leaves him for a sexy yoga teacher called Sven, so he never gets insurance.
Bob doesn’t settle down again until he’s in his forties. His first child is due to be born, and Bob is 45. Again, he wants a 30-year Term Life Insurance policy for €250,000 with a conversion option.
The price takes a bit of a leap:
Let’s say he goes with Royal London and he lives to be 72 and passes away suddenly with a heart attack while oiling his beard. He pays €51.27 monthly until he’s 72. That’s €16,611.48 in premiums.
Now, if he’d got insurance when he was 45 and was paying €23.17 for his cover, he’d be looking at around €10,287.48.
There’s almost €7,000 in the difference.
So ya see…
Now, what would happen if he waited until he was 55 to get insurance?
Let’s say Bob’s fiancée leaves him for Sven, the sexy yoga instructor, and Bob does find love again in his forties – only for her to leave him for sexy Sven too. In a dramatic reveal, everyone will find out that Sven is actually Bob’s long-lost brother and he’s been haunting him for years out of jealousy for being abandoned as a child.
It’s all very elaborate. Really, Eastenders should hire me to write for them.
So. Bob. 55. Wants €250,000 Term Life Insurance for 30 years
Well, for one, if he were to run his numbers through online quotes, he’ll find that the insurers aren’t terribly receptive.
55 + 30 = 85. Sorry, Bob, but the chances of you dying by the time you’re 85 are pretty high so most insurers won’t touch you with a bargepole – or without charging you through the wazoo. We’re talking an eyewatering price per month here (€200+ a month and only one insurer will do it).
Instead, Bob could opt into a 20-year policy for €250,000, with a conversion option.
The numbers are still pretty eyewatering, are they not?
€100 a month x 12 x 20 years = €24,000.
Moral of the story here is that youth (+ a conversion option) is the ticket to a better deal for you on your Life Insurance.
While most 25-year-olds probably won’t need insurance, you can see the difference in opting in between 35 and 45. Getting stuck in earlier could save you thousands, and sure who doesn’t want that?
Looking for more insider secrets to get the best Life Insurance deal for you? I can send you in the right direction. lion.ie is an online insurance Life Insurance broker with years of experience so we can help you get the right deal.
Fill in the form here or give me a call on 057 9320836 to get started.
P.S. if you’d like to know about the people we’ve helped get Life Insurance, head over to our 1,000+ testimonials from people of all situations all over Ireland.
Further reading: How much should you spend on Life Insurance?
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