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28/07/2021

Making Cents: The best life assurance premiums are with…

Making Cents: The best life assurance premiums are with…

Shop around: Like other insurances the best deal may be just a call away

There are five main insurers in Ireland that offer protection products like life cover and serious illness and they are, Irish Life, Aviva, Zurich Life, Royal London and Zurich Life.

But which one of them offers cover for the most competitive premium?

That will depend on your circumstances i.e., your age, the level of cover required and how long you need it for, your health and smoker status, what type of cover you need and so on.

There are different types of life cover, with some being compulsory i.e., mortgage protection and others not – a whole of life type policy.

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 pay’s a Revenue bill if someone were in receipt of an inheritance that was subject to capital gains 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 bank.

If that person died in 23 years’ time when there’s €14,000 outstanding, that’s the amount that would be paid out.

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 1 or year 29, the amount paid out will remain the same.

And because of this, the cost is usually more expensive than a reducing, mortgage protection type policy.

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.

Whole of Life

This is a policy that as the name suggests, lasts for as long as the life insured is alive.

This type of policy is usually 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.

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.

Best for Mortgage Protection.

Zurich Life

Best for Level Term.

Zurich Life

Best for Mortgage Protection + Serious Illness.

Royal London

Best for Level Term + Serious Illness.

Royal London

Best for Whole of Life

Royal London

Single Person – Age 45

The parameters I used in this instance were a single person, mortgage amount of €500,000 and a term of 20 years.

Best for Mortgage Protection.

Zurich Life

Best for Level Term.

Aviva

Best for Mortgage Protection + Serious Illness.

Zurich Life

Best for Level Term + Serious Illness.

Royal London

Best for Whole of Life

Royal London

Single Person – Age 55

The parameters I used in this instance were a single person, sum assured of €100,000 with a term of 10 years.

Best for Mortgage Protection.

Zurich Life

Best for Level Term.

Aviva

Best for Mortgage Protection + Serious Illness.

Zurich Life

Best for Level Term + Serious Illness.

Zurich Life

Best for Whole of Life

Royal London

Couple – Age 30

The parameters I used in this instance were a mortgage amount of €250,000, a joint life policy with a term of 30 years.

Best for Mortgage Protection.

Aviva

Best for Level Term.

Aviva

Best for Mortgage Protection + Serious Illness.

Royal London

Best for Level Term + Serious Illness.

Royal London

Best for Whole of Life

Royal London

Couple – Age 45

The parameters I used in this instance were a mortgage amount of €500,000, a joint life policy with a term of 20 years.

Best for Mortgage Protection.

Aviva

Best for Level Term.

Aviva

Best for Mortgage Protection + Serious Illness.

Zurich Life

Best for Level Term + Serious Illness.

Royal London

Best for Whole of Life

Royal London

Couple – Age 55

The parameters I used in this instance were a sum assured of €100,000, a joint life policy with a term of 10 years.

Best for Mortgage Protection.

Zurich Life

Best for Level Term.

Aviva

Best for Mortgage Protection + Serious Illness.

Zurich Life

Best for Level Term + Serious Illness.

Zurich Life

Best for Whole of Life

Royal London

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.

There’s nothing wrong with arranging it with them either, 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 could be interpreted by some, as one less thing they have to do, and trying to find someone else to arrange it for them is awkward anyway.

The problem with proceeding ahead this way 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 are likely to try and up-sell you a policy, because the more you pay, the more they get paid in commission. I have seen some people end up paying seven times more than what they needed to each month.

So, just be on the watch out for that, and you can avoid this happening by having someone who can deal with all providers and who knows every other aspects of your finances.

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

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