Your blogs are great! I’d love a round-up of why single people without kids should get various types of cover – we don’t have the safety net of a partner to potentially cover our bills, and in the event of death we wouldn’t want to lumber elderly parents with funeral costs. And I am sure there are loads of things I haven’t thought of.
Thanks to Carol for the question ?
There are two ways to skin this particular cat.
I could go through the reasons why a single person without kids would need cover:
– mortgage
– bills
– funeral costs
– student loan debt/private student loans
– credit card debt
But instead, I’ll go through the types of life insurance options available to everyone and drill down on why they could be useful if you are single.
I am starting with my favourite and the cover that EVERYONE should have regardless of whether they are single or have children.
What does it do?
It provides a replacement income if you can’t do your job due to any illness or accident. It will continue to pay out until you return to your job or until the expiry date on your policy. The average duration of an income protection claim is five years, but some people have been out on a claim for over 20 years. Imagine trying to live off your savings for that long.
How important is salary protection for single people without children?
It’s vital unless you have income protection through work – go and check, fingers crossed you already have it. If you do, happy days, move on down the page.
If you don’t have income protection, think about what would happen if you couldn’t work long term. You pride yourself on your independence. The payout from the income protection policy you have paid for will protect your lifestyle and dignity as you will avoid having to go looking for handouts.
For me, it’s a no-brainer, and if you’re already actively saving or adding to your pension each month, it won’t cost you anything more. Divert some of the savings money into an income protection policy.
Just like it’s impossible to outrun a bad diet, you can’t save enough to replace an income protection policy properly. If you’re lucky enough to have €50,000 in savings, this will only last 17 months if you withdraw €3000 per month.
Don’t worry, not many people have access to a cool €50k in savings. Most people would be in trouble without an income for more than 3 months!
How much does it cost?
Several factors will affect your income protection premium:
You can plug all of these variables into our income protection quote calculator and get an instant quote.
Let’s move onto another “living benefit” that will pay out to you while you’re still above ground.
What does it do?
Critical illness cover, specified illness cover and serious illness cover all mean the same thing. Should you get one of the illnesses listed on your policy, the insurer will pay you a big wedge of moolah tax-free.
It’s your third party fire and theft compared to the comprehensive insurance that income protection offers.
How important is it for single people without children?
Let’s look at a common scenario – you have a stroke and are left with symptoms that mean you have to gut your house pretty much to make it more accessible. The bill for the renovations comes in at a whopping €30G’s. Where do you get the money to pay the builders? Fortunately, you took out critical illness cover for, would you believe it, €30,000 so you can get your house in order immediately without having to put the handout.
I say common because strokes, heart attacks and cancer make up the bulk of serious illness claims.
Serious illness cover gives you financial breathing space should you be hit with a catastrophic illness.
I remember going to a presentation by the Marie Keating Foundation. The presenter implored, almost begged us (financial advisors) to push serious illness cover on our clients. The Foundation had introduced a Comfort Fund (a small one-off payment to people who had a cancer diagnosis) that was oversubscribed to the point that they ran out of money and had to close applications. They only resumed it recently.
At its core, serious illness cover gives you financial breathing space should you be hit with a catastrophic illness.
This is the NKOTB (probably showing my age there) in the life insurance market.
What does it do?
Multi Claim Protection Cover is a bit like serious illness cover, but instead of paying out should you be diagnosed with a specific condition, it pays out based on the severity of the condition.
How important is it for single people without children?
It’s especially important if you have an underlying condition that prevents you from getting income protection or serious illness cover. For example, suppose you have diabetes, MS, a heart issue or a history of cancer. In that case, it’s going to be difficult to get income protection or serious illness cover, but you could qualify for MCPC.
What does it do?
Cancer only cover does exactly what it says on the tin. It will pay you a tax-free lump sum should you get cancer as defined on your policy. The definition of cancer for this insurance is identical to cancer on a serious illness cover policy. Cancer only cover costs around 20% less than full serious illness cover.
How important is it for single people without children?
Like MCPC, you can get cancer cover even if the insurers have previously declined your application for income protection or serious illness cover.
What does it do?
Life insurance exists to protect financial dependents. By that, I mean children, a partner who isn’t working or earns less than you or parents who rely on your income. It pays out an amount of money (the death benefit) if you die during the “term/years” of your life insurance coverage.
How important is it for single people without children?
Carol had alluded to putting cover in place to avoid lumbering elderly parents with funeral costs. You can use life insurance for this purpose, but I would recommend Whole of Life Insurance (see below).
However, if your parents rely on you financially, i.e. if they rely on your pay cheque then you should consider term life insurance to leave a lump sum of money behind to take care of your parents should you shuffle off this mortal coil before them. Imagine the parties they’ll have with all of their friends, thanks to your generosity. You’ll be the favourite child for sure!
You can also use term life insurance to cover short term debt like credit cards or car loans which will remain outstanding on your death.
What does it do?
Unlike term life insurance, above, you can’t outlive Whole of Life cover. It will payout eventually as long as you keep up the life insurance premiums.
How important is it for single people without children?
I can see three ways you could use it.
1) Leave a gift behind for a favourite nephew/niece/Nick
2) Pay for your funeral expenses
3) Cover the inheritance tax for the gift you left your nephew/niece/Nick in 1) above. If you intend to leave assets (cash, investment, property, art, watch, car etc. etc.) behind, the beneficiaries receiving those assets from your estate will be stung for inheritance tax at 33%!
You can plan for this in advance for inheritance tax using Section 72 Whole of Life Assurance.
I’m not going to dive too deep into mortgage protection for single people here, but if you have a mortgage, it’s mandatory coverage to clear your debt to the bank should you leave us before you have paid it off.
If you don’t have a mortgage, you don’t need it.
You need private health insurance in Ireland if you’re single and want access to the best possible treatment, quickly.
Personal Accident Cover
This is like the baby brother of income protection. It’s way cheaper and will pay you up to 50% of your weekly wage for up to 12 months if you can’t do your job due to an accident. If you have a manual job, income protection is going to be expensive or impossible to get. Personal accident cover will offer you some protection.
Some protection i.e 50% of your weekly wage is better than nothing.
Surgical Cash Cover
This is a rider/addition to a life insurance policy. You can claim if you have major surgery.
Hospital Cash Cover
Another rider benefit. This will you a daily sum if you are hospitalised for more than 72 hours.
Right, we’ve covered a fair bit there. A lot for you to chew on!
If you’re interested in any of the above, or would like me to take a look at your personal situation and make a recommendation, please complete this questionnaire and I’ll be back over email.
Alternatively, if you’d like a quick chat first, please schedule a call back:
Talk soon,
Nick
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