Life Insurance Explained Simply

by | Apr 26, 2023 | Life Insurance & Protection

Life Insurance Explained Simply Donegal

Life Insurance Explained Donegal

What is Life Insurance

I am sure everyone knows what life insurance is, but just in case, let’s start with a basic explanation.

Life Insurance, also known as Life Assurance or Life Cover, is a type of insurance policy that provides a lump sum payment upon the death of the policyholder.

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The policyholder pays regular premiums to the insurance company, and in exchange, the insurance company agrees to pay out a specified amount of money to the policyholder’s beneficiaries if the policyholder dies while the policy is in force.

Life cover can be purchased for a specified period of time, such as 10, 20, or 30 years, this is called a Term Policy or it can be purchased as a permanent policy that provides coverage for the policyholder’s entire life, this is known as a Whole of Life policy.
The amount of cover and the premiums charged will depend on a variety of factors, including the policyholder’s age, health, occupation, and lifestyle.

Why would you need Life Insurance?

People may need life insurance coverage for various reasons, including:

  • Providing financial security for loved ones: Life insurance can provide a lump sum payment to your loved one in the event of your death. This can help provide financial security for your loved ones who rely on your income or financial support.
  • Paying for funeral expenses: Life insurance can also help cover the costs associated with your funeral and other final expenses, which can be a significant burden on your family.
  • Paying off debts and mortgages: Life insurance can be used to pay off any outstanding debts or mortgages., which can help prevent your family from inheriting any financial liabilities. In most cases, the mortgage lender will insist that a life cover plan is put in place to cover the debts. This type of policy is called Mortgage Protection.
  • Leaving a nest egg: Some people choose to take out life insurance as a way to leave a financial nest egg for their loved ones or a charitable organization.
  • Overall, life insurance can provide peace of mind knowing that loved ones will be taken care of financially in the event of the policyholder’s death.
  • Companies can also put Life Insurance in place for senior employees for the company

Taking out life insurance will be one of the best financial decisions you might make in your life. If you die leaving dependents behind, a life insurance policy could provide some financial security and allow them to meet ongoing expenses.
None of us know what lies ahead and indeed no one really wants to contemplate their own death but if you can afford life insurance cover then you should at least consider what your death would mean financially for your loved ones. Having some level of cover could prove to be invaluable in a time of need.

The different types of Life Cover plans

The types of life cover plans available in Ireland are similar to those available in other countries. Some of the most common types of life cover plans available:

  • Term life insurance: This type of policy provides Life cover for a specific period of time, such as 10, 20, or 30 years. If you die within the term, your beneficiaries receive a lump sum payment. Term life insurance is typically the most common and affordable type of life insurance.
  • Whole of life insurance: You could say that this is a permanent life insurance, it provides cover for your entire life. In addition to a death benefit, some whole life insurance plans also have a cash value component, after 15 years, and grow over time.
  • Mortgage protection insurance: This is a type of decreasing term life insurance policy that is specifically designed to pay off a mortgage in the event of your death. The amount of coverage decreases over time as the mortgage balance is paid off. This is the cheapest form of life cover because the level of cover decreases over time.
  • Serious illness cover: This type of policy provides a lump sum payment if you are diagnosed with a specified serious illness, such as cancer or heart disease. This payment can be used to cover medical expenses, living expenses, or any other costs associated with the illness. This cover can be included in your life cover plan. This is sometimes called a living cover, as payment is made while you are still alive.
  • Income protection insurance: This type of policy provides a regular income if you are unable to work due to an injury or illness. The income is typically a percentage of your salary and is paid out until you are able to return to work or until the end of the policy term.

It’s important to carefully consider your individual financial situation and needs before selecting a life cover plan to ensure you choose the best policy for your circumstances. You should always seek advice from an impartial advisor.

If you have questions. Give us a call at 074 910 3938


How much cover should I get?

The amount of cover that a person needs depends on their own unique circumstances. Your cover need will incorporate debts such as your mortgage and should also include an ongoing sum that will help your family moving forward. Some employers provide insurance that pays out a lump sum if you die so you should check if there is anything in place and take that into account.

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The amount of life cover needed can vary greatly depending on your individual circumstances, including your age, income, assets, debts, and the financial needs of your dependents or beneficiaries.

However, the amount of life cover needed can also depend on your specific financial goals and obligations. For example, if you have a large mortgage or other outstanding debts, you may need additional coverage to ensure those debts can be paid off in the event of your unexpected death.

It’s important to carefully consider your current and future financial needs when determining how much life cover is enough for you. You should speak with a financial advisor to help you determine the appropriate amount of coverage for your individual situation.

How much does Life Insurance cost?

The good news is that life insurance premiums are not as expensive as you might think. Factors that influence the cost of your insurance cover include:

  • Your age
  • Health considerations
  • Your smoking habits
  • The term of your cover
  • Some occupations can also influence the price of your life cover

Putting cover in place could really give your peace of mind for the future.

If you have any questions, please feel free to give us a call on 074 910 3938.

If you have questions on Life Insurance or call us today in Letterkenny: 074 910 3938

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