When applying for insurance cover it's best practice to ask as many questions as possible and life insurance is no different.
Investing in a life insurance policy can be one of the best investments you’ll ever make when it comes to protecting you and your family’s future.
However, we’re aware that taking out insurance cover can be confusing at the best of times, especially when you don’t know what to ask.
That’s why we’ve compiled some of the most common and frequently asked questions by consumers when taking out a life insurance policy.
This is the fourth guide in our six-part series life insurance series, which aims to help you find the right life cover to suit your needs.
You can find the links to other guides in the series at the bottom of this article.
1. Do I need life insurance cover?
Not everyone will need life insurance cover. However, if you have people who rely on you for financial support, such as children or a spouse, then a life insurance policy can help to look out for their futures. This is particularly true for those who don't already have cover in place through their job or pension plan, or who do not have sufficient cover in place at present.
You can learn more about whether or not you need cover in our guide on what life insurance is.
2. How much cover do I need?
As life insurance is primarily taken out to help replace the loss of income should a breadwinner pass away, hence the name ‘life insurance’, this may act as a good starting point with regard to the amount of cover you need.
In general, experts recommend that you take out cover of at least four to six times' the annual gross salary of the person who's getting insured.
However other things such as the number of children you have, the size of your household bills and day-to-day living expenses, and costs for things you might incur in the future such as college fees will also need to be considered before deciding how much cover is right for you.
In general, if you have young children, you'll also need more cover, as any payment will have to last longer.
3. How much does it cost?
Like any form of insurance, the greater the risk you are to an insurance company, the more money you’re likely to pay.
Factors that will affect the overall cost of your policy include the amount of cover you are looking to take out, how long your policy is set to last for, your age, and your health. Whether or not you smoke will also have a big impact on the price you pay, with smokers in general paying around double that of non-smokers.
In short, the younger and healthier you are when you take out life insurance the less you will pay.
If you choose to add any extras to your policy such as specified illness cover or indexation then this will affect the price you pay too.
A non-smoker in their mid 30s who takes out standard cover for €300,000 over 30 years could expect to pay around €30 to €35 a month.
4. What extras can I add?
It’s possible to add a number of added extras to your life insurance policy to provide you with extra cover where you need it.
Specified illness cover, which pays out a tax-free lump sum if you are diagnosed with a serious illness covered by your policy, is a popular extra.
Policyholders can also add indexation, which increases the amount you're covered for each year so that any payout will keep up with inflation.
Convertible term cover is another add-on you can choose. This allows you to extend the term or length of your policy without the need to undergo any further medical examination.
Hospital cash is another popular benefit that people add. This pays out a cash sum for every day you spend in hospital, usually up to a maximum of 365 days.
5. Are life insurance payments taxed?
All life insurance payments are paid out tax-free. The person who receives the payment is the person you name as the beneficiary when you take out your policy.
While the life insurance payment itself is tax-free, some beneficiaries may have to pay inheritance tax depending on their relationship to you, the amount of money they receive, as well as Irish tax laws in place at the time of the payout.
6. What details do I need to give?
When filling out an application you will need to provide some basic information such as your name, date of birth, how much cover you require and for how long i.e. the term of the policy. You must also inform your insurance company whether or not you smoke (or use nicotine replacement products) as this will affect the overall price quoted.
7. Is a medical examination required?
If you’re in good health then you generally won’t be required to undergo a medical examination in order to get cover. However, as an insurer is responsible for calculating your risk to them, you may be required to undergo one depending on certain factors such as your age, previous medical history, and the amount of cover you’re hoping to take out. The life insurance company in question will usually organise and take on the cost incurred for this.
8. Will having anxiety or depression affect my life insurance premium?
It can.
Depending on the severity of your anxiety and/or depression, the cost of your life insurance could increase, or your application for it may be postponed or denied. For instance, if you are at risk of hospitalisation or suicide, then you will be expected to pay a higher premium in comparison to someone who suffers from mild anxiety.
During your application process, you will be required to disclose if you have suffered from or received treatment or medical advice for your mental health over the past five years. This could include taking anti-depressants, attending therapy or taking time off work for your mental health.
It’s important to remember that insurance providers understand that mental health disorders are subjective and are part and parcel of everyday life. They will make allowances for this which means you can still be charged the standard rate.
At the end of the day, no matter what your mental health history is, insurers want to see if your anxiety or depression is under control and if you are getting help to manage it. If you are then you are seen as less of a risk, and it will be reflected in the insurance quote you receive.
If you are unsure about whether you need to disclose certain information to your provider or how your mental health status will affect your ability to get or the price of your premium, speak to your financial adviser for advice.
9. How long should I take out cover for?
Before taking out cover you should consider what type of life insurance policy you need as different types exist. It’s also important to bear in mind things such as the age of your children as if you have a particularly young family you'll need to take out cover that will last longer.
Term life insurance can be taken out for a set period of time that has been agreed between you and your insurer. This is most common for parents who want to make sure their family is protected until their children turn at least 18.
Whole-of-life insurance is another type of policy, and as the name suggests, can last for the whole of a person's life, ensuring policy beneficiaries receive a lump sum whenever the insured party passes away. This is most commonly associated with inheritance planning as inheriting large estates can often be a costly expense due to inheritance tax.
Before taking out life insurance consider what purpose you’re taking out a policy for as this will help you decide for how long it should be in place. Speaking with a qualified financial advisor or insurance broker first will always help to put your mind at ease.
10. What if I already have cover through work?
Some people may be lucky and already have life cover in place through their current employer i.e. a death-in-service benefit.
Death-in-service benefit, which is often linked to a company’s pension scheme, pays out a lump sum in the event of your death while employed with the company. However, life insurance provides a policyholder with far more protection and a wider financial safety net should the worst happen. Life insurance also provides more protection for named beneficiaries.
Furthermore, while employee benefits are all well and good, they could be liable to change in the future, especially if you decide to move jobs or are furloughed indefinitely for a period of time.
A death-in-service benefit is often capped at 4 times your earnings, meaning you may need additional cover, especially if you have children.
Before taking out a life insurance policy make sure to find out to what extent the cover your employer provides affords you, as you may need more.
11. What’s the difference between life insurance and mortgage protection?
Both policies pay out a tax-free lump sum upon death, however there are important differences.
Life insurance provides financial security for beneficiaries and dependents who would lose a main source of income should a policyholder die. The proceeds from a life insurance policy can also be used to pay for things such as day-to-day living expenses, credit card debt, and educational costs for your children.
Mortgage protection insurance on the other hand is required by law and is solely used to pay off the remaining amount owed on a mortgage should one or both mortgage holders pass away before the mortgage has been fully repaid. With mortgage protection the lump sum is paid to your mortgage lender and not a named beneficiary such as your family or loved one.
Additionally, with life insurance, your cover will remain the same for the full duration of your policy, and can even increase if you have decided to add indexation, whereas mortgage protection decreases in line with how much is left on your mortgage.
12. What should I look for in a life insurance provider?
When choosing a life insurance provider, price will obviously be a big factor.
However the customer service record of your insurer should also be borne in mind as well as their financial strength. The last thing you need is an insurer who will make it difficult to process a valid claim, or worse, can't pay out.
Rest assured that all the insurers we deal with on bonkers.ie are fully regulated by the Central Bank of Ireland with a record of paying out claims that goes back decades.
13. Will my premium change or increase over time?
In short, no. The premium you agree with an insurer before your policy comes into effect will not increase for the duration of the term. However, you should bear in mind that the longer the term that you choose, the bigger the premium you can expect to pay, as your increasing age will be factored into the price you pay at the outset.
Of course, your premium could increase if you decide to add extra cover or an additional benefit such as specified illness cover during the term of your policy.
14. Can I cancel a policy and get my money back?
All customers are entitled to cancel their policy at any time within 30 days of starting an insurance policy. This is commonly known as the cooling-off period. If a policy is cancelled within this time frame you are entitled to a full refund of any premiums paid.
If, however, you choose to cancel outside of that time frame you are not entitled to a refund.
You can learn more about cancelling your policy in this guide.
15. Can you take out a policy on anyone?
You can’t take out a life insurance policy on just anyone. You must first have the person’s permission to do so and, most importantly, you must be able to show what’s called ‘insurable interest’. This means that you must be able to clearly show how you will suffer financially if the insured person passes away.
16. Can I switch my life insurance policy?
Life insurance isn't like your utility bills or even products like health or house insurance in that you can’t simply switch to a new insurer. Life insurance and mortgage protection both require you to start a new application as your circumstances and health may have changed since the last time you took out cover.
You can of course take out a new policy if it represents better value but never cancel your old policy until the new policy is actually in place. Rushing in and cancelling could be disastrous if you then find that you cannot get a new policy with similar benefits.
How do I apply?
The good news is that the application process is straightforward when you compare life insurance on bonkers.ie. We help you to get cover in place exactly where and when you need it.
All you have to do is fill in your insurance details with our life insurance comparison tool and we’ll compare premiums tailored to your needs from Ireland’s main insurance providers - it’s that simple.
And what’s more, you could easily get cover in place in less than one hour when you apply with us online.
So start comparing prices today, you won’t regret it.
Take a look at our other insurance guides
Did you find this guide helpful? If so, make sure you check out the other helpful insurance guides in our series:
- Our Quickstart Guide outlines all the guides in our six-part life insurance series.
- Discover how to compare and apply for life insurance using the bonkers.ie comparison tool.
- While reviewing policies, you’ll likely come across some unfamiliar jargon. In this guide, we simply explained 8 common life insurance terms you may stumble upon.
- Before applying for cover, you may want to consider these 10 important factors which will help you make an informed decision.
- Worried you’ll change your mind about applying for your policy? You can learn all about the life insurance cooling-off period and how to cancel your policy here.
You can stay up to date on all the latest insurance news and top saving tips with our blogs and guides.
Here to help
Wrapping your head around life insurance can be confusing. While we answered the main questions consumers have in this guide, get in touch if you have any unanswered life insurance questions. We’d be happy to help!
