How much life insurance do you need?
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In a perfect world we would all have enough life cover to look after our dependants needs now and into the future.
However, for most of us it is a question of affordability and we need to decide on a reasonable level of life insurance cover consistent with our earnings
How long will a lump sum last given a certain income requirement?
Set out below is a guide as to the typical monthly cost of taking out a life insurance policy which, when invested, will genrate an income for a given perios of time.( certain investment assumptions and standard life insurance rates are assumed)
|
Required monthly income after tax |
A 250 k life policy could give you the income opposite for the period specified below |
A 500 k life policy could give you the income opposite for the period specified below |
A 1 million k life policy could give you the income opposite for the period specified below |
|
|
€1,000 |
For 29 years 9 months |
40 years plus |
More than 40 years |
|
|
€2,000 |
For 12 years 1 month |
30 years |
More than 40 years |
|
|
€3,000 |
For 7 years 7 months |
17 years 2 months |
More than 40 years |
|
How much does it cost per month?
|
Your Age next birthday |
€250k cover to age 65 |
€500k cover to age 65 |
€1 million cover to age 65 |
|
|
25 |
€23 |
€41 |
€76 |
|
|
35 |
€27 |
€48 |
€90 |
|
|
45 |
€43 |
€81 |
€149 |
|
What issues do you need to consider when deciding on an appropriate level of life insurance cover.
1.Replacement of Income
Death plays havoc with income! You income potential is probaly your greaest asset. If you are 35 years old and earn €40,000 per annum, you will earn €1,200,000 before you retire and probably double this figure when you take account of inflation.
Some individuals have pension policies that allow for the payment of a certain level of income if the scheme member dies.Most, however, do not have any safeguard in this reguard.
Although it is difficult, you need to imagine exactly where a surviving partner is going to receive their income on you passing away.The state may provide a couple of hundred euro per week, there may be income from a pension scheme, but how much will your partner need to maintain a reasonable standard of living .You also need to consider for how many years this income will be required.These are very important questions.
2.Children and Education
If you have children you also need to look ahead and consider the cost of their education .Children grow up very quickly and with University fees very much on the cards and the cost of going to University being generally much higher than one would expect , you need to plan for this cash requirement also.
3.Debts and Mortgages
If you have a home mortgage you probably already have amortgage protection policy.
Mortgage and other personal debts need attention.Unless your surviving spouse can comfortably afford to repay existing debts you will most likely need cover to discharge all debts on passing away.
All mortgages including investment property mortgages should have mortgage protection insurance to cover the liabliity.
4 Final Expenses
The more cover you need the higher the premium. It really is a question of balancing costs and benefits.
Our consultants are here to help you decide on a level of cover that matches your needs.
5.Inheritance tax planning.
Your dependants may be exposed to tax liabilities in the event that your estate, when distributed, exceeds ceratin thresholds in the hands of your dependants.
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