Where to find the best life assurance premiums - Limerick financial advisor

It’s been a couple of years since I told you who has the most competitive mortgage protection/term assurance premiums available in the marketplace right now.
So, in this article I’m going to bring you up to speed and look at some different scenarios with differing levels of cover, differing ages, differing length of terms etc. to uncover who out of the various insurance companies are offering the most competitive premium.
And there are different types of life cover, with some being compulsory i.e., mortgage protection and others not i.e. a whole of life type policy.

READ MORE: What's the best account to invest money
Each are required for a particular circumstance and that circumstance could be to pay off a mortgage in the event of death of a borrower or one that pays a Revenue bill if someone were in receipt of an inheritance that was subject to capital acquisition tax.
Regardless of the reasons why I’m going to look at some different scenarios and uncover who’s the best provider in each instance but before I do I want to first give you a quick overview of the different types of life policies that are available.

Mortgage Protection
(reducing cover)
This type of cover is compulsory and must be taken out when you get a mortgage. It runs for the term of your mortgage and will pay it off if you were to die during the term.
The level of cover reduces in line with your mortgage. So, if someone took out a mortgage for €250,000 over 25 years and died a year later when there’s c. €243,000 outstanding, that’s the amount the life company will pay to the mortgage lender.

Level Term
Level term cover remains the same for the duration of the policy and doesn’t reduce over time, so regardless of whether someone makes a claim in year one or year 29 the amount paid out will remain the same.

Serious Illness
You can add serious illness cover to a life assurance policy and it can be either accelerated i.e. the amount paid out is an acceleration of the life cover amount or it can be independent and separate from the life cover in place.
You can choose the level of cover and it doesn’t have to be for the same amount as your core life amount is. And serious illness isn’t mandatory when it comes to taking out cover for a mortgage, it’s optional and it’s up to you whether you want to have it or not.

Whole of Life
This is a policy that as the name suggests lasts for as long as the life insured is alive.
The watch out for this type of policy is that the premiums can start off low but as you get older the premium is reviewed typically every five years and can increase significantly to the point where it becomes offensively high resulting in people either cancelling the policy or reducing their level of cover.
This type of policy is also used by people who want to use the proceeds to pay a tax bill for family members who inherit an amount that exceeds their tax-free threshold amount and if this is the case, then the policy is referred to as a Section 72 type policy.
Okay, now that we know the different types of protection polices’ that exist we can look at which providers offer the best premiums. I’ve run some different permutations and the output delivered below were correct at the time of writing this article:

Single Person – Age 30
The parameters I used in this instance were a single person, mortgage amount of €250,000 and a term of 30 years, non-smoker.
Best for Mortgage Protection.
Zurich Life (€13.32 per month)
Best for Level Term.
Aviva (€18.35 per month)
Best for Mortgage Protection + Accelerated Serious Illness.
Royal London (€49.73 per month)
Best for Level Term + Accelerated Serious Illness.
Royal London (€88.13 per month)
Other companies not mentioned above like Irish Life and New Ireland will offer what they call a price pledge which means they’ll match the best premium available so if you can show them that you can get cover at a lower price elsewhere, they’ll match the premium to get your business.
And it’s also worth asking whatever company you are speaking with if they are offering any discounts because some might be.
For example, Zurich Life are offering a discount of up to 20% on their mortgage and term assurance products until December 31, so the premium I just referred to above could even be lower so if you’re not being told about discounts like this, you should ask.
And rather than repeat myself, the price pledges and discounts I’ve just referred to apply to the examples that follow.

Single Person – Age 40
The parameters I used in this instance were a single person, mortgage amount of €450,000 and a term of 25 years, non-smoker.
Best for Mortgage Protection.
Aviva (€34.84 per month)
Best for Level Term.
Aviva )(€46.65 per month)
Best for Mortgage Protection + Accelerated Serious Illness.
Royal London (€159.92)
Best for Level Term + Accelerated Serious Illness.
Royal London (€272.70 per month)

Couple – Both age 30
The parameters I used in this instance were a mortgage amount of €300,000, a joint life policy with a term of 30 years, both non-smokers.
Best for Mortgage Protection.
Aviva (€21.48 per month)
Best for Level Term.
Aviva (€35.54 per month)
Best for Mortgage Protection + Accelerated Serious Illness.
Royal London (€109.01)
Best for Level Term + Accelerated Serious Illness.
Royal London (€201.82 per month)

Couple – Age 45
The parameters I used in this instance were a mortgage amount of €400,000, a joint life policy with a term of 20 years, both non-smokers.
Best for Mortgage Protection.
Aviva (€62.54 per month)
Best for Level Term.
Aviva (€97.39 per month)
Best for Mortgage Protection + Accelerated Serious Illness.
Zurich Life (€347.58 per month)
Best for Level Term + Serious Illness.
Royal London (€622.83 per month)

When it comes to a whole of life and specifically a Section 72 policy, I was telling you a couple of weeks ago about how a client of mine reached out asking about what the cost would be. And let me remind you very quickly about what I came back with.
The amount subject to capital acquisitions tax for his three children was going to be €594,000 and if he arranged a policy for this amount via a Section 72 policy, the monthly cost would be €778.57 per month and if he wanted to arrange cover for €494,000 then the cost would be €634.19 per month and for €394,000 it would cost €506.32 per month.
When you run the math on this and let’s say he and his wife (they are both 55 by the way) live for another 40 years until they are 95, they would have paid €373,714 in premiums but the guaranteed payout would be €594,000.

READ MORE: The pros and cons of making a small insurance claim
It’s one of those types of policies where there is virtually a guaranteed payout of more than what the policy cost. And how can a company do this, well I asked them and there answer was (a) they’d make up any shortfall from lapsed premiums people have made to policies (they make a fortune from this happening) and (b) from premiums that people pay where there is no pay out i.e. they don’t die within a specified time period in policies like mortgage protection or term assurance and that is they pay premiums for say 20 years but at the end of the 20 years they are still alive and the policy comes to an end and nothing is paid out and (c) only part of the premium is guaranteed by the life assurance company, they may outsource say 50% of the risk to a reassurance company.
That’s how that policy works where the payout is more than the cost of the policy so it’s a bit of a no brainer of a policy provided people can afford the monthly cost that is and knowing the monies are going to be used to pay a Revenue tax bill.
Okay, I’m nearly finished. Some last few points to be aware of.
As I said earlier, the majority of life companies have a facility called price pledge, which allows them to reduce their premium to match whoever is charging the lowest premium. So, if you are arranging cover from one provider it’s always prudent to get a number of quotes for others where you can stand them alongside each other and see what they need to reduce their premium to, if they want to get your business.
And when taking out a mortgage you don’t have to arrange your life cover through the bank who is financing your house purchase either. It’s actually illegal for them to suggest you have to take out the life policy with them in order to secure your mortgage.
And there’s nothing wrong with them arranging it by the way. It can be convenient to fill out one more form when you’re signing a whole lot of other mortgage documents and for some people it’s just one less thing they have to do and trying to find someone else to arrange it for them is awkward anyway.
The problem with this as I see it is twofold (a) your bank is likely to be a tied agent and can only offer you one price from only one provider so they are not independent and you could end up paying more than you need to and (b) they may try and upsell you a policy because the more you pay the more they get paid in commission.
So, just be on the watch out for that and you can avoid this happening by having someone who can deal with all providers.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie