There are many types of Life Insurance and many varying reasons people take out life cover however the definition mostly remains the same. It is fixed cover, for a fixed term, at a fixed price. The reason for your cover will dictate what kind of life cover you might need to opt for.
A type of Life Insurance that decreases or counts down over the term of the policy. For example, €200,000 Mortgage Protection Insurance over 20 years will decrease in line with a mortgage of the same value and after 20 years both the life cover amount and the mortgage amount will equal zero. Similarly, ten years into the mortgage and the Mortgage Protection policy, the total amount of cover will be €100,000 to match the total amount remaining on the mortgage. It is designed so that at any one time, your mortgage would be paid off in full if you were to pass away. This type of policy is usually “assigned” to the lending institution, meaning that the proceeds of the policy must go to the bank or lending institution.
Mortgage Protection can also have serious illness cover alongside it that behaves in the same manner as the Life Cover. It is taken as a percentage of the total amount of the Life cover: 100%, 75%, 50% or 25% and decreases with the total loan amount. This would mean that either all or some of your mortgage would be paid off if you were to become seriously ill at any time during the term of your mortgage.
A more straight forward cover and can be taken out to solve a multitude of problems. It is a fixed amount of life cover e.g. €200,000 and is taken out over a particular length of time. This length of time can vary depending on the purpose of cover.
Some examples might be:
- Cover taken out for the purpose of protection of your Children in the event of you passing away might be taken out until the youngest child reaches financial independence. This is so that education and care would be suitably taken care of financially if you were no longer there.
- Cover taken out to protect a spouse in the event of your death might run until retirement age. This is so that your income would be replaced if you were to pass away.
Term Insurance can also have serious illness added onto the policy. This is similar to the above but does not have to equal a certain percentage of the total cover.
Term Insurance is one of the most popular types of cover on the market owing to its versatile nature it can be put in place for a number of purposes and can be quite a cost friendly product giving ultimate peace of mind.
Whole of Life Cover
Life cover that runs for the rest of your life. It is cover that is designed to cover for smaller amounts that might be used to take care of funeral expenses or small loans that the life insured might have. There are two sub types of Whole of Life Cover which are differentiated as follows:
- Over 50’s Cover for people over 50 years old. It is cover that has a guaranteed acceptance for all applicants and does not demand any health information at all. Owing to its simplicity, over 50’s cover can be costly and should only be considered if your health is a concern to you or the Life Company. There is also a period of the first two years of cover only covering accidental death. Therefore, if you were to pass away from a pre-existing condition or illness you would only get back the premiums you have paid into the policy.
- Ordinary Whole of Life Cover is much the same as Term Insurance; it just runs for the whole of your life. It is still subject to medical underwriting and full cover kicks in straight away. Generally this kind of cover is cheaper than the above mentioned Over 50’s Cover.