Saving Money On Your Life Cover – A Real Life Example
3 February 2021
In recent conversations with clients, I have noticed there can be some confusion surrounding the type of life insurance policies people think they have and what they actually have. Often these policies were set up years ago and quite simply people have forgotten what type or how much cover they have.
I will give you an example from a new client last year. A married couple with two young children. When they took out their mortgage years ago, they also took out a mortgage protection policy with the bank, we will call this Policy One.10 years later they switched their mortgage for a better rate and they again took out a mortgage protection policy with their new bank, we will call this Policy Two, without having cancelled Policy 1, even though Policy 2 was essentially replacement cover. The clients also have two young children and had decided to take out extra life cover to leave a lump sum for their dependants in the event of their premature death, we will call this Policy Three.
On reviewing the above policies, and re-pricing them on the open market to provide like for like replacement policies, I found I could save them in excess of €4,500 over the term of their policies. However, Policy Two was an exact replica of Policy One (which should have been cancelled) so there were even further savings to be made. Unfortunately, the clients thought Policy Three would also pay them an income if they were diagnosed with a serious illness which was not the case but thankfully this was realised before such an event occurred.
I will not get into the details of the specific recommendations I made with this case other than to say this couple now understand exactly what cover they have and it meets their current requirements. I simply wanted to use it as an example to show how important it is to review your cover every few years to ensure you are reminded of what the policy provides.
We all have varying needs at different stages in our lives. There are certain trigger points in a person’s life such as taking out a mortgage, getting married, having children, going self-employed or changing jobs where we would certainly recommend a review of life cover/protection policies to ensure you have the right cover to meet all your needs at that particular stage in your life.
I would recommend that you contact a Financial Broker to review your existing policies to ensure they are competitively priced, meet your needs and to remind yourself of what the policy will do for you. This way you can be confident in the cover you have and rest assured that if the need arises, those that you have made provisions for will be looked after in the way that you meant.
Jacinta Clerkin, BSc QFA FLIA RPA, is a Qualified Financial Advisor, Fellow of the Life Insurance Association and Retirement Planning Advisor. You can contact her through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on email@example.com