Life Insurance vs Death in Service Benefit

Life insurance pays out a lump sum if you die or suffer a critical illness (depending on the type of cover you hold), helping your dependents to cope financially.

Death in service is similar. Death in service may be offered by companies as part of an employee’s benefits package. It’s paid out as a tax-free lump sum if you’re employed by the company (i.e. on the payroll) at the time of your death. Your employer will be able to explain how this benefit is calculated.

Some people may be unsure if they have death in service, while others may not know if it would be enough for their family to live on. Also, those who have this benefit may not realise they could gain from taking out life insurance too.

Death in service benefit is not taxable, but it can vary (though it is typically two to four times your annual salary). It can be linked to a company’s pension scheme, and you’ll need to be signed up to it to qualify for the benefit. Be mindful that tax is based on your personal circumstances and may change in the future.

The pay-out of a life insurance policy depends on the cover you have – meaning you have the freedom to decide how much your beneficiaries get, not your employer. While a life insurance pay-out is also free of income tax or capital gains tax, bear in mind it could form part of your ‘estate’ – your overall net worth – so may incur inheritance tax.

With death in service there’s no annual or monthly premium to pay – you just need to be employed to benefit from it. You’re required to make regular payments for life insurance, but your family or named beneficiaries could receive a higher pay-out in the event of your death.

It’s also worth remembering that if you leave the company where death in service is offered, you’ll no longer be covered. You are unable to assign your death in service benefit to cover your mortgage, but your beneficiaries can decide to use the money towards repaying a mortgage.

Most people who are not members of a death in service company plan can take out their own policy. The reason you might do this is because you can get tax relief (like your pension) on the premium cost of the life cover. So, if for example, the cost of your cover was €100 per month and you were on the higher rate of tax you may receive up to €40 a month tax credit.

Start Protecting Your Child’s Future

Ever since your children entered the world, you’ve done everything you can to protect them, giving them endless love and attention.

But what about protecting your little ones’ financial futures? As a good friend quoted, ‘the days are long but the years are short’. So the earlier you start taking steps to securing a happy financial future for your kids, the better.

Life insurance

If life insurance has never been a priority, now that you have a family, it could be the ideal time to make it one. Having cover in place will help protect your loved ones if something were to happen and they were no longer able to rely on your income.

Similar to other types of cover, you can tailor your life insurance to suit your needs, choosing from different levels and a range of optional extras.

For instance, critical illness cover can be added to your policy so that if you were diagnosed with an illness covered by the plan, you will receive a cash sum. This money can help to relieve the financial worries associated with critical illnesses, covering time spent off work, ensuring you can still pay household bills, and funding specialist treatment.

And what would happen if you were forced to take a prolonged period of time off work? Adding income protection to your life insurance policy would replace some of your earnings if you can’t work.

Make a will

Not the most pleasant task – but if anything were to happen to you, you want to be certain your family is provided for and cared for by the people you would choose.

You can either write a will yourself, hire a solicitor or use a will-writing service; make sure you research each option thoroughly before deciding, as they all have pros and potential drawbacks.

Part of the process involves you appointing an executor, who will be responsible for carrying out the instructions left in your will. Executors need to be aged over 18 and can be listed in your will, so it could be your spouse or family member.

Savings options

Driving lessons, college, weddings may all seem like a world away, but planning how to build a savings pot to help fund your children’s future will give you a head start.

With the aid of our new financial planning tool we can highlight how best to use your money in order to plan for you and your family’s future. This tool processes all your incomings and outgoings to give a clear picture of where you stand financially, guiding you to make the correct decisions.

Life Check-Up

When you apply for life insurance, you may be asked to complete a medical exam. While the life company will pay for this medical exam, it is also worthwhile booking a medical check-up whether you are applying for insurance or not.

What does a health check-up test for?

The medical check-up determines your risk of developing a range of health problems, such as heart disease, kidney disease, stroke and diabetes. It also provides you with an opportunity to gain practical advice on how to minimise the risk of developing these issues.

Unfortunately, leading a healthy lifestyle doesn’t mean you won’t develop health issues, though it will limit your risk. A medical check-up can flag problems before they develop into something more serious.

What to expect from a medical health check

A health check generally lasts around 20-30 minutes and is usually carried out by a nurse, but it could be another healthcare professional. You shouldn’t need to prepare anything in advance, but it’s always worth asking the health centre you’re booked in with.

During the check-up, you may be asked: 

• If close relatives have had the illnesses you’re being assessed for

• If you smoke and how much

• If you drink alcohol and how much

• What your typical diet is like

• How much exercise you do                                                                                                                          

After this, you’ll undergo a series of simple tests and measurements, including:

• Your weight and height to determine your body mass index (BMI) and your waist may be measured

• Your blood pressure will be taken using a cuff on your upper arm

• A small sample of blood will be taken from your finger to check cholesterol and possibly blood sugar level

In most cases, you’ll receive the results immediately. You’ll be given a risk score (the higher the score the more likely you are to develop one of the illnesses) and will receive advice on how to adapt your lifestyle to lower risk.

What are the benefits of a medical check-up?

According to the Irish Heart Foundation, in 2016 more than 9,000 people in Ireland lost their lives to cardiovascular disease with almost half dying from heart disease.

The Irish Heart Foundation argues that in many cases, heart disease and stroke are preventable. Lifestyle changes such as regular exercise, having a healthy diet and stopping smoking, can have a positive impact when treating diabetes, high blood pressure and cholesterol.

What now?

Choosing the right life insurance cover for you and those closest to you is important and will provide many great benefits and peace of mind. Don’t let the fear of a medical check-up hinder your decision.

You’ve worked for your money, make sure your money is working for you!

Although I believe commissions will remain part of the process on one level, I have been working on a new financial planning service which I will be offering to new clients over the coming months. Many existing clients have found this a very useful and concise tool in setting out a clear plan for their future. I believe this is a prudent exercise, wanting to know how our future will look and getting the most from our money.

Do you ever imagine what you would like to do in retirement or when your mortgage is paid off or even to retire earlier than you thought?

Some questions and comments I regularly hear when I meet people for the first time are:

• I know I should save into a pension, but can you explain why it’s better than saving into a savings plan?

• What will my pension pay me at retirement?

• I am self-employed, can I protect my income if I am unable to work due to illness or injury?

• I have pensions from a previous employment, can I get access to them on any level or what can I do with them?

• I think I have mortgage cover, but I do not know what it does, can you explain it to me?

• Should I pay more towards my mortgage and if so, what change will it have on my term and interest payments?

• I don’t understand how a life assurance policy payment affects me if my partner dies.

• What is the difference between Leaving Service Options and Retirement Options?

Should a person wish to avail of this financial planning service, it involves a simple 3-step process:

1. You will receive a link to a budget planner where you fill in your personal and financial details. This is a comprehensive budget and will take up to an hour to complete.

2. You submit the planner and I review and prepare recommendations and advice.

3. We meet to discuss the results of your budget, your priorities and how you can better manage your money from a savings / pension / life assurance perspective.

Following this, you decide what step to take next. Either way this process will at the very least be an education to anybody who has no current strategy for retirement or savings needs.

Smokers Pay Way Higher for Life Cover

Quitting smoking can pay off in more ways than one... as ex-smokers stand to save substantially on life cover.

Smokers can pay twice as much for life insurance than their non-smoking counterparts, according to figures released today by a leading protection specialist, though people may not be aware of just how sizeable the difference between the premium costs.

At this time of the year when people are challenging themselves to kick the habit as part of their new year’s resolutions, the cost comparison may be the encouragement they need to keep going.

Smoking in Ireland – The Statistics

The Healthy Ireland Survey 2018 results showed that smoking rates are the highest among the 25-34 years group. For people in this demographic the financial implication that being a smoker has on the cost of their life assurance will add up. A smoker who will turn 35 on their next birthday can expect to pay over €5,700 more than a non-smoker for €300,000 worth of Life cover over a 25 year term.

Another example; a smoker turning 45 on their next birthday will pay over €16,600 more in premiums than their non-smoking counterpart for €300,000 worth of Level Term Life Cover over a 25 year term.

Sample Cost Analysis

Level Term Assurance Life Cover

Age      Term (year)       Monthly premium non-smoker        Monthly premium smoker     Savings over 25 year term

35                25                                       €24.11                                                     €43.37                                    €5,778.00

45                25                                       €53.01                                                    €108.53                                  €16,656.00

So for anyone who gave up smoking at the start of 2018 and are purchasing cover for the first time; they can expect to pay less than they would have one year ago. For individuals with protection cover already in place who have managed to give up smoking for more than 12 months, they can potentially avail of a reduction in the cost of their premiums.

Most Life companies would classify a non-smoker based upon total abstinence from any tobacco products in the last 12 months, including the use of e-cigarettes and nicotine replacement products such as patches or chewing gum.

Case Study: “I don’t really know what we have, how can you help and if so, how much will it cost?”

Enquiry:

I received a call from Mary, a potential new client, asking me how I could help her and her husband to understand their current cover and pension provisions. She stated she had a mortgage protection policy but wasn’t sure exactly what this covered. She remembered her partner (Peter) taking out an insurance policy which included some illness cover but didn’t remember exactly why they had the policy. They both had various pensions with different companies and employers and she wanted to see if it would be worthwhile merging them.

Cost:

Mary hadn’t previously used a broker so was a bit apprehensive. “Before we go any further, what is the cost for you to review our policy’s?” I responded with “If you are happy for me to be your broker on these policies, there is no additional cost for you.” Mary: “But how do you get paid?” Me: “In many cases a broker’s fee is included in a policy whether you use a broker or not. You can request a fee-based charge which I can calculate based on work required but this will not reduce the cost of your existing plans.” In short, most people prefer to pay through fees paid direct from the pension/life providers.

Information gathering:

Mary asked me to investigate their policies and I informed her that if both partners simply sign a document entrusting me as her broker, I could obtain all the information required to review her policies. Mary asked if this would change her policies in any way or cost her more money. I reassured her that this just allowed me to discuss her policies with the companies but that it did not authorise me to make any changes or give any instructions that would impact these plans. I emailed this one-page document to Mary and they both signed and returned it to me.

Meeting:

I met with Mary and Peter following my review and was able to outline the exact cover and pension savings they currently held, along with the pro’s/con’s to making changes or leaving in place. They informed me of their priorities and as their children were in their teens there wasn’t a necessity for as much life assurance, so they decided to direct more of their funds towards their pension.

Peter had become a non-smoker, so a cheaper price or more cover for the same cost became available to him. Mary had the option to combine two pension plans, however she was better off moving it into a pension bond in her own name. If she had chosen to combine, she would have lost a tax-free lump sum option that was unavailable in her existing employers pension plan.  

Second Opinion?

Being diagnosed with a serious illness would be an emotionally overwhelming experience if it happened to you. You would have lots of questions: What will happen now? Is the diagnosis correct? Will the treatment be right? How can I be sure? Now, there is someone to help you answer these difficult questions. The result could save your life. If you or a loved one were diagnosed with serious illness, Aviva Best Doctors - Second Medical Opinion can help.

What is Best Doctors - Second Medical Opinion and how can their service help?

• Best Doctors - Second Medical Opinion is a global organisation which brings the world’s leading medical expertise to you and your family offering a second opinion when you need it most.

• Best Doctors - Second Medical Opinion has a unique and well-renowned network of over 53,000 peer reviewed medical professionals. Having such expertise at their fingertips and supported by a truly caring service team, is the reason why thousands of people around the world turn to Best Doctors - Second Medical Opinion when they need it most.

• Best Doctors - Second Medical Opinion can help you with those questions that are likely to be racing around your mind if you were diagnosed with a serious illness.

An in-depth review of your medical files will be conducted by a Best Doctors medical specialist to help verify your diagnosis and treatment options. The process can reduce potentially serious complications that can result from a misdiagnosis, and help you and your treating doctor determine the proper course of action.

But Best Doctors - Second Medical Opinion isn’t just for serious life threatening illness. You can use the service for any chronic or troubling ailments affecting quality of life. For example, sports injuries, skin diseases, cancer, blood diseases to name just a few.

This feature is available at no additional cost and Aviva will match the lowest market price available for the cover. It can even be used for conditions diagnosed before you took out your Aviva policy and is available with the following Aviva protection policies.

• Term Cover

• Mortgage Protection

• Specified Illness Cover

• Personal Income Protection

• Executive Income Protection

• Pension Term Assurance

Terms and conditions apply. If you currently have a Life Assurance policy and wish to review your cover, it’s worth consulting a financial broker.