Life Assurance That Guarantees Cashback

The primary benefit of Life Assurance is to financially protect a family in the event of a death. When deciding if you need Life Assurance the kind of questions you should consider:

  • How will my family adjust financially if my partner or I die?

  • Will my mortgage be paid off?

  • Will my loans be paid off?

  • What sort of lifestyle will I be able to maintain?

  • Have I appropriate provisions in place long term?

  • Would I be able to afford to not work for a period of time?

In most cases, Life Assurance has a set amount of Life cover and a set time period. The average Life Assurance policy is cancelled within 8 years which means that many people will be taking out a new policy and will not receive any benefits from their current plan. There is generally no value on these policies unless you are making a claim.

A Life Assurance company has recently introduced a Whole of Life cover that offers you several options once you have passed 16 years. Once you have paid into it for this term, every year thereafter you will have an option to continue paying, encash the policy (receiving 70% of your premiums back) or stop paying for the cover and you will maintain a specified amount of Life cover forever.

Here is an example for a person who is 45 years of age, a non smoker who takes out €100,000 Whole of Life cover. The cost of this would be €111.66 per month (half the cover would cost roughly half the price). Let’s imagine they are retiring at 65 years of age, so they have paid into this plan for 20 years at that stage but they want to know what options they have at that time:

  1. Change Nothing:  They can continue paying this policy. The premium will always be €111.66 and the Life cover will remain at €100,000 while they continue payments.

  2. Guaranteed Life Cover €35,023: They can cease paying the €111.66 per month premium. They would be told at that time that they will have €35,023 Guaranteed Life assurance for the remainder of their life.

  3. Guaranteed Cashback €17,644: They can cease paying the €111.66 per month premium. They would be entitled to encash the policy for a guaranteed €17,644. There would be no further cover from this policy.

Unlike some of the older whole of life “with savings/encashment” benefits, these are not investment policies. The figures are guaranteed and you can see the different options available from year 16 onwards (every year you pay beyond year 16 increases the offer available). If the policy is cancelled before 16 years, then the above options are not available.

Survey reveals more women (36%) than men (24%) think that personal responsibility is at the core of overcoming the obesity epidemic

 A survey from a well known protection provider has revealed 48% of Irish people believe that the way to tackle the rising national obesity levels is through school-level education. A survey commissioned by the leading life assurance provider asked 1,000 people throughout the country their views on how they think Ireland’s expanding waist lines should be addressed.

The survey found a split in opinions between genders and age divides as to what is considered the most effective approach. More women than men, 36% as opposed to 24%, believe it’s up to each individual themselves to take personal responsibility if this is a health issue they face; with this view being most prevalent amongst those aged over 55 (46%).

While the healthy living lifestyle trend appears to be very popular in Ireland today, from the booming gym and personal training industries to the popularity of ‘healthy living’ advocates, such as TV personalities and bloggers, it’s hard to believe that now only 40% of Irish people are at a healthy weight.  

Obesity and its impact on Life Assurance

Life cover is different from most insurance products because it is priced based on a number of key criteria which take into account the insured individual’s lifestyle. It is one of the few insurance products which is tailored specifically for the person insured.

This usually means the healthier you are, the lower the cost of the cover. A person’s medical history and lifestyle always comes into play when underwriting life assurance as the cost of cover is based not only on the sum assured and the length of the policy, but also on the individual’s age, state of health and certain lifestyle factors. So, if you smoke, drink a lot of alcohol or are obese, your premiums will be higher to reflect the increased risks to insure someone that has a greater chance of medical issues and shortened life expectancy associated with smoking, liver damage and obesity.

Life companies follow a matrix compiled by reinsurers which give ratings for specific lifestyle factors which are analysed to determine pricing.  It’s important to note that if someone is about 10 pounds over their ‘ideal’ weight, the cost of their life cover should not be affected. If an individual is looking for life cover and would like to know more about how their weight or lifestyle may affect it, why not contact a Financial Broker. A Financial Broker will be happy to provide expert guidance around the available options based on individual needs.

 

Irish worrying less about money, health is still biggest focus……

According to research commissioned by a leading protection specialist, 37% of Irish people view money as their biggest worry this year. What is particularly noteworthy about these findings is that this is almost 10% less than the 46% who said that money was their biggest concern in 2016. The survey asked 1,000 respondents nationwide what their biggest worries were and what their biggest focus was in 2017.

Health was cited as the majority of people’s main focus (37%), followed by career (26%) and travel (13%). What is surprising is that there has been quite a drop in the number of people who identified money as their biggest concern in 2017 when compared with last year. This could this be an indicator that things are on the up for people financially as Ireland is on track to have the EU’s fastest growing economy for the fourth successive year and has a decreasing unemployment rate which last month was at a near 9-year low.

The survey found that after money, 22% worried about their family most in 2017, a big jump from the 14% who said the same the previous year. Meanwhile double the number of respondents said they were concerned with loneliness compared to 2016; 8% versus 4% respectively.

The survey results also highlighted the large difference that exists between the priorities of the younger and older generations surveyed. For 18-34 year olds the focus lies, understandably, much
more on their career (42%), health (19%) and family (13%). While an equal amount of 18-34 year old respondents (10%) said property and travel were at the forefront of their minds. For over 55s their
biggest priority was their health (60%) and travelling (27%).

Overall health is a big focus for every age group surveyed. It is the top focus for 35-54 year olds and over 55s whilst it is the second top focus for 18-34 year olds. One of the ways people are prioritising their health is shown by the uptake in more Health Insurance policies. The largest uptake increase has seen people in their 40s taking out policies, with almost 33,000 people between the ages of 40 and 49 joining a scheme since the start of 2015. As people are becoming more informed and involved in protecting themselves, there has been a noticeable increase in people interested in discussing Serious Illness cover and Salary Protection cover.

There is no escaping that money is still a big worry for many people throughout the country. Unfortunately managing household finances can be challenging. The thought about what might happen in the future that could adversely affect family finances, is never far from peoples’ minds, it would appear. Making contact with a local Financial Broker to discuss personal finances and the options available to people may be one way of helping to alleviate this worry.

Mortgage Approval in Principle ...

Mortgage Approval in Principle from a mortgage broker or lender gives prospective buyers an idea of how much they would be approved for based on the information they provide about their finances.  This usually gives a reasonable indication of the type of mortgage you might be able to get but there is a lot more to an application process that can delay or lead to a declined proposal.

As such, I try to dig much deeper at application stage to make sure that there are less surprises and delays further on in the process. There have been instances where people have received approval in principle quickly with a financial institution, but have contacted me months into an application where they are still being asked to clarify information regarding their application. 

Documents required when applying for a mortgage

If your application is approved in principle, the following are examples of documents that you might also be asked to provide: 

If you are a PAYE employee, you will typically need to provide:

  • Your most recent P60 (original)                                                                                                    
  • A Certificate of Income (a standard form provided by the bank for completion by your employer)
  • Your last three months payslips                                                                                                
  • The last six months bank account statements

If you are self-employed:

  • Your last two years’ certified/audited accounts
  • The last six months business bank account statements (if business account is not with that bank)
  • Your accountant’s or auditor’s written confirmation that your personal/business tax affairs (PAYE/ PRSI/VAT) are up to date
  • Your management figures for the current trading year
  • You may also be required to provide identification documents and confirmation of your address. This is usually a current valid passport or driving licence and recent utility bill. 

Additional costs in purchasing a property

  • Valuation: Before you draw down your mortgage, the property will need to be independently valued by a professional valuer – you should expect to pay a fee of between €150 and €250 plus VAT, but this can vary.

  • Legal fees: You will need to pay legal fees to your own solicitor. As part of your own arrangement you need to agree with him or her whether this is a flat fee or a percentage of the purchase price. 

  • Stamp Duty: Stamp duty will also apply to the purchase. The current rates are 1 per cent of the purchase price up to €1,000,000 and 2 per cent of any value over that.

  • Insurance/assurance: You will also need life cover and home (buildings) insurance – the costs of these can vary depending on your requirements and circumstances. Life and buildings cover will need to be in place before you draw down your mortgage.

Mortgage term
Mortgages of up to 35 years are available to first-time buyers. Terms of up to 30 years are available to those trading up or down. Irrespective of whether you’re a first-time buyer or a mover your mortgage term must not go past age 70.

Getting Mortgage-Ready!

Applying for a mortgage can be a detailed and time-consuming process. The bank is eager to see that you can afford to take on a mortgage repayment and still have enough money left each month to enjoy your new home. To help you prepare for this process we have compiled a checklist to ensure that your application is successful.
 

  • Your income - lenders will look at your annual income and some may take bonuses or overtime into account. Some lenders may factor in rental income if you plan to rent out spare rooms.

  • Outstanding loans/Credit record - if you have other loans, this may reduce the amount of money you can borrow. Keep credit cards and personal loans paid on time. Missed repayments could affect the amount you can borrow for your mortgage and also your credit history.

  • Savings Having a regular savings account in which to save your deposit is important.  The bank will also take into account if you are paying monthly rental payments on a property – it demonstrates your ability to support this level of monthly repayments. You should arrange to pay your rent through your bank account – even if you are living at home and making a contribution to the household.

  • Day-to-day finances Make sure you manage your accounts so that you don’t go over your credit limit – this shows that you have been able to manage your finances effectively for a period of time before you apply for your mortgage. Lenders will look at any financial commitments you have, such as childcare costs. 

  • The value of your house - this is the market value, or purchase price of your house.

  • The amount you need to borrow - this is the difference between the amount you have saved to put towards the house (your deposit), and the purchase price of the house.

  • Additional costs You will need to show how you can cover additional costs such as stamp duty, legal fees, valuation fees and any additional expenses that might arise during your application process.

 

Deposit required

  • First-time buyer
    If you are a first-time buyer, a 90% limit will apply with a 10% minimum deposit. If there are two parties applying for the mortgage, both must be first-time buyers for the mortgage to be considered for these advantages. A Help-to-Buy incentive is also available and it is designed to assist first-time buyers with obtaining the deposit required to purchase or self-build a new house or apartment to live in as their home. It provides for a refund of Income Tax and Deposit Interest Retention Tax (DIRT) paid over the previous four tax years to first-time buyers. See the Revenue website for further information.

  • Non-first-time buyers

    If you are not a first-time buyer, different rules will apply. A lender may lend up to 80% of the value of the property that you wish to buy. This means you need to have the remaining 20% saved for your deposit. Banks do have a discretionary option to allow some applicants to apply outside of this criteria.

To be continued...

The future of financial advice in Ireland

So this is where we take out our crystal ball! Consumers sometimes are not clear about the value of financial advice, a situation that we are trying very hard to change. We know the value that is offered every day by Financial Brokers the length and breadth of the country, so here are a few thoughts on what you can expect to gain from seeking financial advice from a professional Financial Broker. The good news is that this future has now pretty much arrived! A good Financial Broker will deliver on these today.

Consumers don’t want conflicted advice
This is probably the key point. Consumers want advice and financial solutions that are based on their specific goals and objectives, and not those of the person giving the advice. The independence of the advice giver is critical here, they need to be able to seek out and provide the very best solution in the market for the client. The days of “force fitting” clients to the single product solution that is the only one available to a product seller are long gone. The solution must start and end with the client – their specific goals, their requirements and their specific circumstances.

Financial Brokers are not aligned to any one organisation and can advice upon the products of many organisations. Their advice starts and ends with the client, not the products available to them.

Consumers want clear and transparent charging
Similar to any other product or service bought by consumers, they rightly want to know what it is costing them. The providers of financial advice need to be able to clearly demonstrate the value that they are bringing through their advice, and what this advice costs. The adviser needs to be able to set out clearly how they will make a difference to the financial future of the client, and charge accordingly for this. Consumers can choose to pay for this through commission taken by the adviser from products, or by separate fees – however the adviser needs to be able to communicate clearly the value that will be gained from their advice.

Financial advice is about lifetime relationships
This might sound like a lofty statement, but it is so true! Financial advice is not a point in time transaction, it is a journey. It starts with the adviser identifying the desired financial outcomes of a client (the destination) and understanding the client’s current circumstances (the starting point). The adviser then puts in place the financial solutions (the vehicle) to help you achieve your objectives.

But as with any journey, the minute that you set off, everything changes! Financial markets change, your circumstances change, maybe your objectives change. So your financial adviser needs to travel on your financial journey with you.

Unlike in your bank branch, your Financial Broker will be a consistent figure throughout this journey. Continuing to guide you and redirect you as needed.

Financial advice was never more valuable. Can you afford not to get it from a Financial Broker?

 

3 things you might not know about Mortgage Protection Insurance

Mortgage Protection Insurance is life assurance cover that will clear your mortgage in the event of your (or your spouse’s) death. While it is obviously very necessary, taking out this cover often comes at a bad time for consumers, who are to the pin of their collars facing a new mortgage and all of the costs associated with a new house. For this reason, it is really important that you get the best (often the cheapest!) cover in place. Here are three points that you may not have known about mortgage protection insurance, that just might help you to get the right policy for you.

You don’t have to take out this policy with your bank. Your bank may arrange your mortgage for you. They may also insist on you having mortgage protection insurance in place as a condition of your loan. That is their right. However they cannot by law insist on you taking out this policy with them and cannot make the loan conditional on you doing so. You retain the right to take out any mortgage protection policy available in the market, once you ensure the required amount of cover is in place.

Now this is really important!

Your bank will usually have access to the policies of a single life assurance company. However your Financial Broker will have access to policies of all of the insurers in the Irish market, making sure that you get the very best / cheapest policy to meet your needs. Your bank must accept this policy.

Your cover does not have to decrease in line with the mortgage

The life assurance cover within traditional mortgage protection policies decreases in line with the outstanding mortgage amount. This is the minimum amount of cover that you must have in place – enough to clear the loan at any stage during the lifetime of the mortgage.

However you can have more cover in place. As part of a wider financial plan developed by your Financial Broker, you might choose to have a level amount of cover that will not fall, possibly for the original mortgage amount. In the event of death, the life cover amount will then be greater than the mortgage due, as some of the mortgage will have been repaid in the meantime. This excess cover is simply then paid to your estate.

There are many other benefits available

One of the benefits of taking out your Mortgage Protection insurance through your Financial Broker is that you can tap in to their knowledge of all of the plans that are available in the market, and access features that might not be available through the policy offered by your bank.

There are many other potential feature and benefits available through different insurers in the Irish market, and some of these features might just be very important to you. So talk to your Financial Broker and get the best policy in place for you!

 

Are you too young for a pension plan?

You are never too young for a pension plan. That’s it, end of article? But maybe you need to be convinced of this fact!

The benefits of starting your pension funding as early as possible are really immense. Now we are not suggesting that everyone should live a life of penury in their 20’s and 30’s in order to safeguard their lifestyle in their later years. But starting a pension plan early has a significant impact on your final retirement outcome and this is down to one main fact, the effect of compound interest.

The Rule of 72
To look at compound interest, it’s useful to consider a maths equation that is commonly known as “The Rule of 72”. This is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. All that you have to do is divide 72 by the expected rate of return. The answer is the number of years it will take for the amount of money to double. Consider two examples of how you can use this below;

• If you are aiming for a return of 6% p.a., it will take 12 years for your investment to double (72/6% = 12 years)
• If you want to double your money in 10 years, you will need to achieve a return of 7.2% p.a. (72/10 years = 7.2%)

The impact on your pension plan
This rule demonstrates that a contribution made to a pension plan in your 20’s or 30’s has the benefit of time on it’s side to grow very significantly from the time it is made, to your retirement age. And because you have this time on your side, you will probably also be willing to take some risk with your funds, with the aim of achieving higher growth rates.

These higher growth rates may be achieved through investing in the likes of equity (stock market) funds. If you had invested in the S&P 500 Index of shares from 1st January 1985 to 31st December 2014, your investment would have achieved a Compound Annual Growth Rate (annualised return) of 11.40 per annum over the 30 year period! Now of course previous returns are not necessarily a guide to future performance, but they give a sense of what can be achieved over a long timeframe.

So when you put higher potential growth rates and a longer term together, the impact can be significant. Instead if you wait until much later in life to start your pension planning, you will probably want to be more cautious in your investment choices (to limit any downside risk), thus reducing your potential growth rate. You also won’t have the investment duration to benefit from the compound interest effect.

So yes, live your life for today while you’re young. But doing this with some investment in your future will yield great benefits when you do eventually hang up your working boots!