The financial services industry has failed (since its inception) at speaking clearly to the public. We layer term upon term, with each company throwing in their own jargon to add to the confusion. As a result, many people are put off from seeking advice. I hope this post will provide some bit of clarity and empower you to ask questions.

life insurance edition:

Assurance or Insurance?

• Some people use assurance when describing whole of life cover and insurance when describing term life cover. The terms are actually interchangeable. I use the term insurance as a catch-all.

Dual Life Policies vs Joint Life Policies?

• Dual and joint conjure the same meaning for most people. When discussing life insurance there is a big difference: Joint life policies will pay-out just ONCE, insuring two lives and paying only upon the first death, after which cover ceases. Dual life policies will pay-out TWICE, insuring each life individually.

Is mortgage protection life cover?

• Yes, mortgage protection is simply life cover on a decreasing basis. This means that your life cover declines over time to mimic your mortgage as it is paid down. You will be asked to take out a mortgage protection policy by your bank when drawing down a mortgage, the bank will then place an “assignment” on your policy to ensure they receive the proceeds of the policy in the event of a claim. If you pay off your mortgage, the proceeds are paid to your next of kin, just as with any life policy. Furthermore, you don’t need a mortgage to purchase mortgage protection, the name comes from its common use.

What is the sum assured?

• The sum assured is amount of cover in place. On a life policy, this is the amount paid in the event of a claim. On a serious illness policy, the illness may trigger a different amount (higher or lower) benefit depending on the terms of the policy.

What is a continuation option or conversion option?

• Continuation or conversion option is another set of terms that can be used interchangeably. This option allows you to convert to a new policy, without evidence of good health. With this option, once your policy is in place, any change of health is irrelevant, you will continue to receive the same health rating going forward. This option is truly important. Some older life policies have “one time conversion” rules, meaning you have one opportunity to convert/extend your policy. All new policies in the market offer “rolling conversion” allowing you to convert the same policy as many times as you wish until you meet the maximum age of cover set in the policy terms.

What is “death in service” cover?

• Death in service cover refers to life cover provided by your employer. Your employer can provide up to four times your salary in life cover to be paid to your estate if you are to pass while in service. This life cover cannot be assigned as mortgage protection. Any cover over four times your salary will be paid as a spouse’s pension and not in a lump sum.

What is over 50s life cover?

• This should be referred to as “ill health” life cover. Over 50s life cover is a life policy that has a maximum cover of typically €25,000 with an increased monthly premium in exchange for no medical underwriting. If you are in poor health and would like to secure cover for your final expenses, this is an option -but should be used as a last resort as the premiums are much higher than policies that require underwriting. Many people over 50 (and over 60) qualify for life cover and do not need to resort to a medical free policy. Don’t be deterred by common ailments such as high blood pressure, cholesterol, even a history of cancer.

What does is mean to ‘assign’ my policy?

• Assigning a policy means any benefit is payable to the third party nominated on the assignment. Assignments are most commonly arranged on mortgage protection policies. The assignment on a mortgage protection policy releases your policy’s benefit to your bank to clear the mortgage. Once your mortgage is cleared, any remaining policy proceeds are paid to your estate/next of kin.

What is Guaranteed Insurability?

• Guaranteed Insurability is a built in feature on (most) policies that allow you to increase your cover at certain ‘life events’ such as marriage, birth of a child or draw down of a mortgage. The increase is typically limited to a percentage of your initial cover limit. This is a valuable option for anyone who has a change in health and cannot qualify for a new policy. Not all providers offer the same terms regarding guaranteed insurability -one of the many reasons we do not recommend purchasing life cover online without speaking with an advisor -it is very hard to determine which policy is best by a price line up alone.

What does it mean when a broker says they are “shopping the market” ?

• There are 5 life insurance companies currently in the Irish market: Aviva, New Ireland, Irish Life, Royal London & Zurich. Not long ago there was a sixth life company, Friends First; Aviva acquired Friends First and is now servicing their policies. All brokers have access to the SAME rates for each life company. Brokers use software online that is updated daily by each life company to run quotes. Periodically life companies will offer additional promotional discounts reducing the “standard” rate offered online. Most life companies will “price match” the best market rate, eliminating price as a reason for purchase. A broker will help you choose the best policy contract offered. Each life company offers a handful of added policy benefits, such as, a second opinion medical service, parental respite cover, access to therapy services etc. -these added benefits are not provided by the broker and will be available to you depending on which life company you choose -I mention this because I often see these benefits advertised on brokers’ sites as if access to the added benefits is part of doing business with that broker, it is not.

What is a premium “loading” or “rating”?

• A loading or rating (again interchangeable) is an increased premium applied to the “standard” health rate. A loading is applied when underwriting perceives an increased risk due to an ongoing, recent or history of illness. In some cases, the life company applies a temporary loading where your rate will reduce to standard rates after a period of time -often in cases where a diagnosis is recent. If a permanent loading is applied and after some time you feel you are in better health, you can reapply with an aim to receive a better premium. Loadings are not typically applied against common minor health conditions such as raised cholesterol or blood pressure.

Did I miss some?

• Email me with any queries not addressed above, cheers!

Author: Rachel O’ Shea, Protection Manager