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On the face of it a “Life Cover only” insurance policy is essentially quite a simple thing, a contract between an insurance company and the owner of the policy, under which the company agrees to pay out a benefit upon the death of an insured person. The proceeds of a policy can be used to clear a family debt or fill the gap left in the household income after they are gone. It is generally accepted that it is important to have such arrangements in place should an untimely death occur.

You often hear advertisements on radio and TV for companies who will allow you to arrange your Life Cover (or Mortgage Protection) very simply, even by completing an online application. They tend to mention “instant cover” and low, low premiums. These companies do not however provide the client with any advice beyond the actual cost of their chosen plan.

In my meetings and discussions with clients, I advise them about the amount and type of cover they need, and how long they will need it for. It is also important to clarify certain aspects and features of the different types of policies available from the various providers.

While it is important to provide the best value, so as to give as high a level of cover as possible for the premium the client can afford, there are other things to consider. The companies all have different restrictions and features, for example:

• the maximum age to which cover can be provided
• the maximum and minimum term of an individual policy
• Conversion (which means that when the term of a policy expires you can take out a new plan from the same provider with benefits up to the same level of cover as you have at that time without any need for new medical evidence)
• Indexation (which provides protection against the effects of inflation).

Various levels of Children’s Benefit are provided by the companies also, and some companies are more flexible than others in allowing you to make changes to the policy during its life. Some companies provide Terminal Illness benefit which would pay out some or all of the Life Cover upon diagnosis of a condition considered to present an imminent end to life, but they may have different requirements around how the insured person would qualify for such a payment.

A good financial advisor will research all of the available options, discuss your budget to ensure affordability, and make a recommendation based on all the information provided by both the client and the insurance companies.

Please bear in mind, the lowest premium is not always the best value!

Sean Sweeney, QFA RPA is a Qualified Financial Advisor and Retirement Planning Advisor. You can contact him through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on sean@jfl.ie