Q&A

This week your questions on insurance cover are answered

I took out a life assurance and critical illness policy with Ark Life five years ago. The policy is worth approximately €90,000 for both death and serious injury. My monthly premium is 68.

My query is whether this represents good value for money. I am a 26-year-old public servant with death-in-service pension scheme, which includes death-in-service benefit and spouse's pension. I also have an income continuance scheme which will pay 75 per cent of salary and costs 25 per month.

I am considering whether the money paid into the life assurance scheme would not be better spent on VHI cover (which I don't have) plus an additional private pension.

Mr C.B., Dublin

You probably should get an independent fee-based adviser - one with no particular incentive to sell you anything other than best practice advice - to assess your full position.

How much life cover one needs depends largely on one's personal circumstances. There used to be a rule of thumb that dictated that people should have cover of between 10 and 14 times salary. But that would generally be for people with dependants and outstanding financial commitments.

At 26, you do not indicate whether you have dependent family, a partner or children. If not, you clearly would not need as much cover as people in such a position.

It strikes me that you may be double covered in certain respects.

As you acknowledge yourself, as a public servant you have a guaranteed defined-benefit pension scheme. As part of that, you have death-in-service benefits, which would provide an element of life cover for any family you might have.

On top of that, your employment provides a generous income continuance plan.

You do not say whether you have a mortgage but, if you do, you almost certainly have an attendant mortgage protection policy, which is effectively life cover on that debt.

All told, I think you probably would be better off paying for private health insurance rather than for serious injury cover if the choice is between one and the other. After all, the 90,000 would not go far in covering medical bills in the event of serious injury.

Further, while you are paying 68 a month at the moment for the life cover and serious injury protection, that premium may rise, possibly dramatically, as you get older. Review your options.

Spread-betting

I started spread-betting with an Irish firm in January but lost my entire 5,000 start-up investment within two months. I was wondering if I can claim the losses against capital gains tax on any share profits I make this year?

Mr L.B., Wicklow

There are pluses and minuses in getting involved in spread-betting compared with direct investment in shares. On the plus side, the costs are smaller and the potential gains tend to be magnified.

However, on the downside, as you have discovered, is the possibility of losing your money very quickly.

Spread-betting started life as an amusement for City traders with too much time and money on their hands and an addiction to risk. It is certainly not for the faint-hearted and it is all too easy, once you get on a losing run, to see your investment disappear.

The bad news from your point of view is that you will not be allowed to set those losses against any future capital gains.

Capital gains and losses arise only where you make or lose money in the sale of an actual asset. You are not selling any asset, merely betting against the movement of an asset that you do not hold.

As such, capital gains and losses are not an issue. As the Revenue points out, if you could claim for losses against other capital gains, you would have to declare any winnings for capital gains. Not that it affects you, but you don't.

The only tax that comes into play with spread-betting is the standard betting tax and this is usually factored in by the spread-betting firms.

For what it is worth, if you did make capital losses on the sale of actual shares rather than on betting on share-price movement, you could offset them not only against other gains made this year but on any future capital gains until the loss is fully offset.

Irish Nationwide

Over the past year, you have had a few questions about people wondering whether or not they would qualify for a windfall if the Irish Nationwide demutualises. The surest way of determining this is to ask them if they got notice of the annual general meeting and, of course, they don't remember.

As the notices went out last week, this would be a good time to highlight it.

If people got notice of the meeting last week, they are considered by the Irish Nationwide to be members. If they did not get the notice last week, the Irish Nationwide does not consider them members and they should take it up with the Irish Nationwide immediately.

I think that there is going to be a stampede of queries when the demutualisation is announced, so people should do something about it now. If they are not happy with the response from the society, they can always take it up with the ombudsman.

Mr B.B., Dublin

That's very good advice. There are, as you say, a lot of people out there who have accounts with Irish Nationwide Building Society but are very confused about whether this entitles them to a share of any windfall.

The acid test of membership of a mutual society such as Irish Nationwide is the right to vote at the annual general meeting. If you haven't got a vote, you're not a member - at least in the view of the society.

There are several people out there whom I have come across with accounts carrying the word "share" in the title, which one would assume are accounts granting holders a share of the society - i.e. membership - but who have not received voting forms or details of annual general meetings.

The time to act is now rather than when the decision to demutualise is announced. The first point of contact for accountholders should be the office of the company secretary at Irish Nationwide. You should check for a full list of accounts broken down into those that are eligible for membership and those that are not.

Check whether your account has changed name or status down the years.

And, as the letter writer adds, if you are still not satisfied, contact the ombudsman for the credit institutions.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.