A Comprehensive Guide for Understanding Life Assurance in Ireland

Life assurance is a financial product that ensures peace of mind and financial security for your loved ones in the event of your death. It is a common way to take care of your dependents financially, even after your death

What is Life Assurance?

Life assurance, often regarded as life insurance, is an agreement between an individual and an insurance company. The insurance company under this contract agrees to pay a lump sum amount regarded as the death benefit to your beneficiaries upon your death.  In return, you pay regular premiums to the insurer for the policy duration. 

The main goal of life assurance is to provide financial support to your dependents, covering various expenses such as mortgage payments, education costs, and everyday living expenses.

Types of Life Assurance in Ireland

There are many different types of life assurance policies in Ireland, each of which is designed to meet various needs

1.      Term Life Assurance:

This policy offers benefits for a specified period of time that pays the beneficiaries at the time of the death of a policyholder. The coverage can be for specific periods such as 10, 20, or 30 years. If a person dies during the term of the policy, it pays out to the beneficiaries. Once the policy term expires, the policyholder can renew it for another term. The policy can also be converted to permanent coverage or lapse after the end of the term. This policy is ideal for people who want to cover specific financial obligations, such as a mortgage or children’s education, for a set period.

2.      Whole of Life Assurance:

This policy provides insurance coverage for your entire life as long as you pay a premium for it. This policy also ensures a payout to your beneficiaries whenever you pass away. It is an ideal policy for people who want to ensure a guaranteed payout for their loved ones, regardless of when they die.

3.      Mortgage Protection Life Assurance:

It is a special kind of life assurance that helps you pay off your mortgage in the event of your death or in case you are seriously ill. When any person takes out a mortgage, they need to have mortgage protection, but you don’t have to buy it from your lender. 

4.      Convertible Term Assurance:

Convertible term assurance is a kind of policy that allows you to convert to a whole-of-life policy at the end of the policy duration, without the need for new medical information. It is also regarded as a ‘conversion option’ as part of a level term life insurance policy.

Why should a life assurance policy be part of your financial planning?

·         Financial security for dependents: This policy safeguards your dependents financially in the event of your death. It provides money to beneficiaries to cover house expenses such as mortgage payments, medical bills, and tuition payments. It will enable your family to maintain their normal life without dealing with financial obstacles in your absence.

·         Debt obligations: Many people borrow money from banks and other institutions to meet their varied needs, such as housing, education, and vehicle purchases.  A life insurance payout allows dependents or family members to pay debts efficiently, so they don't need to sell property or face financial difficulty in the absence of the policyholder

·         Estate Planning: A life assurance policy can be utilised as a tool for estate planning, so your beneficiaries can receive tax tax-free inheritance

·         Emergency preparedness: When you know that your loved ones will be taken care of, it brings peace of mind, allowing you to focus on other aspects of life.

·         Tax Considerations: Life assurance payouts in Ireland are usually free from income tax. However, these insurance policies may be subject to inheritance tax (Capital Acquisitions Tax – CAT) if the amount is more than the tax-free threshold.  One must get advice from a financial advisor in Clonmel. They can help you understand the implications of the potential tax based on your specific circumstances.

Selecting the right insurance policy

Selecting an appropriate insurance policy requires you to take into account many factors such as your age, health, financial situation, etc. Here are some things to consider for choosing a life assurance policy

·         Assess Your Needs: it is important to consider your financial obligations for choosing the appropriate policy. Such obligations can be mortgage payments, education costs, and other debts, as well as the living expenses your family may incur without your income.

·         Compare Policies: It is advised to shop around and compare different policies and providers. You should also consider various premiums, coverage amounts, policy terms, and any additional features or riders.

·         Review Regularly: As life changes, your financial needs also change. It is recommended to review your life assurance policy regularly to ensure it meets your requirements

Wrap Up

Life assurance is an important aspect of sound financial planning. Whether you are looking to cover specific debts, arrange for your family’s future, or looking for a policy to pay off your mortgage, there is a life assurance policy suited to your needs. It is crucial to take your time to evaluate their options and consider seeking advice from a financial advisor in Clonmel to make an informed decision that aligns with your long-term goals.

Protect your finances with Eolas Money – your trusted financial planner in Clonmel. Get assistance for life insurance quotations, critical illness cover, and income protection tailored to your needs.