Life Life Policy - the basics

Tayto

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I am reading up on threads here - my reason for posting is I literally know nothing about Life Policy and what it entails.

I'm buying a house and so this has cropped up. I have been googling stuff, and got a quote via Chill.ie brokers for cover for 18pm for 26yrs.

With serious illness cover cheapest is €68.

Again I know cheapest isn't always best...

The problem is my lack of knowledge - I don't know what are the smallprint things to look out for or what I should be querying as inclusive, get out clauses.. selling the house etc...

Can someone give some basic pointers?

Thanks
 
THe first question is "What do you want ?"

Do you want the basic life insurance demanded by your mortage company, which will pay off the remaining mortgage if you die ?
If it is a joint mortgage - do you want a policy that pays off the mortgage is either of you dies ?


Serious illness cover is a separate issue which is not required by your mortgage and it is a personal choice if you think it is necessary.
 
Hi Tayto
To answer your question
1)Mortgage Protection is normally associated with a mortgage and reduces in line with the mortgage balance outstanding
2) Life Assurance can be arranged in a similar way to 1 above but the balance here does not reduce in line with the mortgage balance and any left over amount should there be a claim on the policy will go to your estate. This is normally the better value longer term as the balance remains constant with an option to extend beyond the original term without medical evidence which can be included, also more commonly known as term assurance (level or Convertible)
3) Serious /Critical Illness cover this pays out a benefit if you become seriously ill and survive the illness. I would never put this cover as part of a mortgae or assign it to a bank. It would be a plan i would take out seperately.
If the cover you need is for a mortgage my advice is to go with the cheapest initially until you fully understand the affordability of the others when paying for your mortgage. Hope this helps
Padraic
 
HuskerDu, that's the million dollar question, I don't know, hence my post :)

Thanks PadKiss that is useful. The Bank wrote telling me I need 'Life Cover' so does that mean I can buy either Life Assurance or Mortgage Protection? Or must it be Life Assurance? Now I think of it Chilll.ie said the amount doesn't reduce over the contract and the total cost of the protection to me is around 5.6K for it's lifetime.

I'll ring the Bank also tomorrow and double check also.

Thanks again!
 
Hi Tayto
Both will satisfy the banks requirement for the mortgage the difference is as outlined in my earlier reply. Both are life assurance policies with one being "reducing term cover" and the other being "level term cover" P
 
With "reducing cover" obviously being cheaper.

My advice to you would be to get the cheapest cover to satisfy the bank. This will mean in the unfortunate event that you die, the house will be paid off. This is what the bank wants as they really don't want to be chasing a grieving widow or accepting a lose if the worst happens. So get a reducing term cover for the life of your mortgage. Do be aware however if you over or under pay your mortgage your life policy may not match anymore.

Separate to that, you should consider whether YOU want life cover - not the Bank. Do you have a family and would you want them to get a pay out to help them cope without your monthly wage if you die? As you house is taken care of you just need to decide what amount you want to cover yourself for on top of that. The again if your young, fit and with few ties maybe it's not worth it to you to get this extra cover. Or perhaps your job has "death in service" benefit which would do for this?

Now if you bought both together in one policy it would be cheaper. But that does also tie you in to getting bank approval when you want to change it.

Personally I bought my house when I was younger and got just enough to satisfy the bank. Now I've a wife and young son I'm looking at whether I need more.

Critical illness cover is again supposed to provide a wage if you can't work so can't bring in a salary. The mortgage company won't require this and won't accept it instead if Life cover. In my opinion these are poor value so personally I wouldn't bother.
 
Ok, big thanks. This is helping.

I might come back with a few more questions as they crop up if that's ok :)
 
Does the premium quoted for non mortgage protection life cover stay fixed for the term of the policy?

Say I take out a joint life policy of €150k and it's quoting €15pm - is this just for the first year? Is it going to get more expensive every year I get older?
 
I have a joint life first death policy attached to the mortgage.

I then have a whole life/first death policy to provide a lump sum to live on. I don't think they sell whole life policies any more so I'm happy I have this.

I also have a work policy attached to my pension which will pay 4x my salary if I die before retirement.
 
Kennyb3, what you're talking about is called indexing. Different policies handle this differently but generally if the payment is indexed (usually to inflation) then so is the monthly premium. It may sound good that your premium is fixed at €15 per month but on the flip side €150k won't be worth the same as €150k in 10, or even 40 years.

Fraggle, they do still sell whole of life policies but term ones are more and more popular instead and it's not difficult to see why This is because whole of life policies are expensive since it will definitely pay out (providing you keep paying the premiums). Term policy has a much higher chance of not paying out at all so it's considerably cheaper. Additionally most people don't need life insurance later in life as they have less financial commitments (hopefully the mortgage is paid off, the kids are grown up and moved out and are financially independent... etc.). So if you're 30 you could get 30 years term policy (to cover you until you're 60 in case the worst should happen) but after that you might be happy not to have life insurance for reasons given above. This would be considerably cheaper than paying for whole of life policy for 30 years and then stopping. On the other hand the good thing about whole of life insurance is, if you do still need it, you can keep it on. After a you're a certain age term policies are very difficult to get.
 
I'm paying 63/month for my whole life first death policy. My mortgage policy is 25/month.

63/month is 756/year... *30 to retirement (roughly) is 22680.... which I'm happy to pay as it is rated to give me EUR215k when the first death occurs. Considering people living longer that might pay an extra couple of weeks in the nursing home in the future :)
 
Hi Fraggle
Good to see that you are covered however i do not believe the 63 per month policy is actually a whole of life policy that is cover lasting for the rest of your life without the premium ever changing. It appears more likely to be an open ended policy which provides cover for the rest of your life but only if the premium being paid is sufficient to pay for the level of cover chosen. I will attempt to explain this as follows assuming you are 30 and you live to 90 the max premiums you will pay on your policy that you believe is whole of life would be 45360 but there is a guranteed payout of 215k. Not sure this is correct. I would check you documentation and check re the sustainability of the cover as this will clearly tell you the likely term the cover will last (you should have been provided with a quotation for this cover as well as a reason why letter) . Hope this helps but i would check it out now rather than when you will be asked to pay more for your cover as you get older. Padraic
 
which I'm happy to pay as it is rated to give ME EUR215k when the first death occurs.

Feeling pretty confident here fraggle? Hope there's no suspicious circumstances involved in your spouses death or AAM will be crawling with special branch;)
 
Well I took the cover out about 15 years ago and don't recall any limitations like that but I was young (<25) then and probably not clued in. I shall ask them for the documentation. I get an annual statement but I don't think I have the original documentation!

@seantheman: a slip of the keyboard!
 
Mortgage protection is the cheapest cover and as others have said will satisfy the bank for a mortgage. Always wise to have a separate policy in place for family cover. Check out lowcommission.ie for quotes as well as chill and 123. One of these will be the cheapest!
 
I just went to 123.ie and got a quote for 215k joint cover Life Long Protection.

It said the premium would be 300euro/month for 'undefined years'. I am paying 63.

I then picked 30 year Term Life and I was quoted 55/month.

So, to me, I seem to be getting a Whole Life for the price of a Term Life..... unless my premium is going to rise substantially in later years.......

I'm not sure if having taken out a policy was I was <25 is making a difference.

My policy is an Ark Life Lifelong Protection Policy.... I can see a current AIB policy of the same name guaranteeing that the payment amounts will not change. Page 8 in this doc.... [broken link removed]

Need to look into this more as I'm worried now as I'm unsure.
 
Kennyb3, what you're talking about is called indexing. Different policies handle this differently but generally if the payment is indexed (usually to inflation) then so is the monthly premium. It may sound good that your premium is fixed at €15 per month but on the flip side €150k won't be worth the same as €150k in 10, or even 40 years.

Thanks for the response, still not sure it answer my question. Let's assume i'm comfortbale with €150k for the next 5 years and don't want that to be indexed. Is the €15pm fixed?

I just want to know that if i take out a policy this year, that there isn't a chance the repayments will be €25pm in say 3 years time and then I'll want to cancel it as I find it 'expensive'.
 
Unfortunately I can't answer that as each policy is different. However usually if the €150k won't increase, then the €15pm won't either. The policy is usually up front about whether it contains indexing of premium, payout or both (and, as I say it's usually on both or on neither).

However some policies also have a clause saying the premium/benefit can be reviewed periodically and adjusted. So rather than both increasing 3% a year, they might stay the same for the first 30 years but then, as you get older (and more likely to claim!) they review and say "your risk profile has changed, pay more per month or accept a smaller payout". Unfortunately you need to read the small print to find this sort of thing. Those tend to change the premium in jumps, and usually only years down the line, rather than a gradual increase like you mentioned.
 
I just went to 123.ie and got a quote for 215k joint cover Life Long Protection.

It said the premium would be 300euro/month for 'undefined years'. I am paying 63.

I then picked 30 year Term Life and I was quoted 55/month.

This shows exactly why term policies are much more popular and common. That and the fact that most people are OK to accept they only need term cover (for the reasons I gave in my other post), for the much reduced premium.

And yes, if I were you I would definitely double check your cover! Hopefully you got lucky and are getting a great deal but I'd be suspicious with such a cheap premium. Also check for a clause like the one mentioned in my post above.
 
I just went to 123.ie and got a quote for 215k joint cover Life Long Protection.

It said the premium would be 300euro/month for 'undefined years'. I am paying 63.
Hi Fraggle

123.ie policies are now underwritten by Irish Life since the 8 of Jan.

My policy is an Ark Life Lifelong Protection Policy
So the policy is definitely not the same as your policy as yours is underwritten by Ark Life, however it is easy to get confused as Aib are also selling Irish life policies since last year but are no longer selling Ark Life as they have sold on the book of business to a company in the UK and it is now closed to new business.

Your Ark life policy is almost definitely a "Reviewable Whole of Life Policy" which means that in the first 10 years the policy premium is guaranteed however the premium would be reviewed every 5 to 7 years thereafter.

This may or may not result in a premium increase at time of review, but at some stage Ark will need to increase the premium and these increases can be as much as 500%. You should look at your statement and see if the policy has a fund value which will indicated that the policy is a reviewable WOL.
 
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