How much life cover do you need?
With term life insurance, your cover is not limited to the size of your mortgage. So, if for example you take out a policy to cover a mortgage of €350,000, should you die when the outstanding mortgage has fallen back to €200,000, your estate will still be entitled to the full amount. With such a policy you can also carry it across to a new property, which means you would not have to be reassessed and it might work out cheaper in the long-term.
A conversion option on the policy guarantees you can purchase additional protection in future without having to provide evidence of good health. However, as Geraghty notes, this will cost you up to 8-10 per cent extra.
As the name suggests, the policy runs for a set period, usually terms of five years up to 40 years. Financial advisers typically advise that you take cover out until your youngest child has left school or college.
The most expensive – and most comprehensive – type of cover available is for whole of life. With this product your life is protected until you die, and even if you stop paying into it the policy will not be cancelled – rather the insurance company will reduce your level of cover. However, it’s important to note your insurance provider is likely to increase your premiums over the life of the policy, and while you can opt for fixed premiums, this will be expensive.
According to Geraghty, it’s really only for specific cases such as parents who want to ensure a child with special needs is adequately provided for, and he warns against people being mis-sold this product.
How much will this level of cover cost me?
If you’re in the market for mortgage protection cover, you should budget from upwards of about €15 a month.
For example, €290,000 in cover for someone who is 27 years old, over a 35-year term, will cost €16.66 a month for a male non-smoker with Zurich. For a female non-smoker, the cost goes down to €13.17, while smokers can expect to pay about €10 a month extra.
If you’d rather stick with term life cover, prepare to pay that bit more. According to the itsyoumoney.iewebsite, the cheapest premium available based on the same terms as outlined above is again from Zurich, at €23.62 for a male non-smoker, or €18.44 for a female non-smoker.
What if I can’t afford it?
Before you panic, remember that death-in-service benefits are typical at many employers. For instance, if you work for Google in the US you can expect some spectacular cover. The online giant recently announced that if you die while working for it, your surviving spouse or live-in partner will receive 50 per cent of your salary every year for the subsequent 10 years, while your children will receive $1,000 a month from Google until they reach the age of 19 (or 23 if the child is in full-time education).