New Mortgage Protection Practices for Cancer Survivors

A new code of practice for underwriting mortgage protection policies for cancer survivors has recently been launched by Insurance Ireland. This is very positive option and good news for clients who have beaten cancer.

The COP (Code of Practice) is a framework which will allow those who have survived a cancer diagnoses to be exempt from the normal underwriting process for their cancer history in specific circumstances. This means that an applicant will get normal premium rates for their cancer medical history, as opposed to a loading on the rate or other underwriting decision.

The criteria for cases applied for may include the following.

·         New applications should be for mortgage protection, life cover only.

·         The maximum acceptable level of life cover per life, is the lesser of the mortgage amount or €500,000.

·         The application can only relate to primary private residence – first time buyers, home mover and re-mortgages for example (does not apply to second property, holiday or buy-to-let properties).

·         For the mortgage protection cover to be valid the mortgage amount must be drawn down from the lender. So, a mortgage life cover application on its own, without a mortgage being in place cannot be used as family protection cover.

·         The applicant must have ended their cancer active treatment and their cancer must have been in remission for more than 7 years prior to their application.

In order for the process to work in an applicant’s favour, they must disclose their cancer medical history when requested. By not correctly disclosing a cancer history and treatment details when asked, there can be serious implications should a claim occur in the future.

Just on a separate note, some cancer survivors don’t have to have ended treatment or be in remission longer than 7 years to be able to get life insurance cover. I have previously set up a life protection policy for a cancer survivor who had successfully claimed on a Specified Illness policy some time before.

Do I have enough Life Assurance cover?

It is understood that if you plan to purchase a property in Ireland, you will be required to have a Mortgage Protection policy in place. This policy is used to pay back the mortgage loan amount in the event of death.

Is Mortgage Protection enough life cover? Depending on your age and whether you have a family or dependents, then no, Mortgage Protection alone is regularly not enough.

Why would I need more Life Assurance cover? A salary coming into a household is used for bills, loans, savings, and other big life events. If this salary ceases in the event of death, a replacement will be needed to cover the shortfall. If you have a young family, you will need more cover as you will need any benefits to last for a longer time.

How much is enough? We tend to avoid thinking about losing our loved ones, let alone the financial consequences. There is more than one way to work out how much life cover you might need. A basic starting point is to multiply your gross salary or your household annual expenses by a factor of eight.

The following Dual Life Assurance quotations are an example of the cost for a couple who are non-smokers and with the option of conversion (this allows you to convert your policy before the term ends to a new policy without the need to provide medical evidence).

The term is for 10 years, and the cover is €250,000. The premiums below cover both lives and is dual cover (meaning the amount of €250,000 will be paid out for each individual life in the event of death).

Sample quotes December 2023

You may require less Life Assurance cover in the case where; your dependents are financially independent, you have death-in-service benefit through your job, you have substantial savings, or you have investments or a property which could provide an income or be sold.

It is beneficial to know that at various times throughout the year, life companies can offer special discounts on premiums to brokers. For example, one company is currently offering 6 months cashback on certain new protection policies.

If you have a Mortgage, you may be able to save a few quid…

Over the last while I have received several queries from people who have purchased new homes in the locality in recent years. When you take out a mortgage to purchase a home, generally the mortgage company requires that a mortgage protection policy be in place when contracts are being signed.

At a time that can be quite stressful, using a bank to set up a mortgage protection policy can be the easiest, straight-forward option. While there is no issue with using a bank to set up your mortgage protection, some people do not realise that they are not obliged to take a policy out directly with the bank. Many people are not aware that you can shop around at any stage to find a more competitive premium for your policy.

Mortgage Protection is a cheaper form of life assurance, as the cover reduces in line with your reducing mortgage balance, unlike more traditional life assurance cover that remains constant (or can even increase) during the life of the policy. The purpose of this cover is simply to repay your mortgage in the event of your death and this gives security knowing that the mortgage balance will be cleared.

When I receive enquiries from people to review their mortgage protection I have access to multiple providers in the market, which allows me to compare premiums to find the most competitive cost available. It is worth enquiring to see if you can reduce your monthly premium cost. At times during the year, the life companies provide brokers with special offers like reduced rates or additional benefits to be included on your policy.

There has been instances where upon reviewing mortgage protection taken out in the last few years, I have been able to save people between 10-30% of the cost for the exact same cover.

Let’s say for example, that your mortgage protection premium is €50 per month and your mortgage term is for 25 years. If it transpired that you could save perhaps 20% in the cost of the cover by moving provider, it could mean a savings of up to €3,000 over the 25-year term.

Even if you took out the policy in the last few months, you are not obliged to maintain it once you have alternative cover set up in its place. Please note, do not ever cancel life assurance until you have replacement cover in place and active.

Cashflow Planning

The heading makes the task sound a bit boring, and slightly business-like… but the actuality of this term is something we all do in everyday life! Each month, most of us will have bills to pay, maybe a mortgage/rent, household utilities, insurance…followed by food/clothing bills, savings and hopefully some funds to put aside for a social life or something nice to enjoy as a reward for our hard work. This short-term planning is an important and smart habit to have and can help us be prepared for any unexpected bills or events that may occur along the way.

A secure online financial planning system we use for creating financial reviews can help with the long-term cashflow planning. It allows safe access to a portal where you input your expenditure/liabilities, savings/income and most importantly, your objectives now and further into the future. The more information you can input, the clearer the picture can be for your financial adviser and the more accurate the recommendation. It helps to highlight any areas where you may need to perhaps direct funds towards protecting yourself and your family or maybe towards saving for big life events such as starting a family, college fees, buying a property or preparing for life in retirement, to give some examples. Or maybe you have a dream of cruising around the world and want to figure out how you can make it happen!

Although this system helps identify the areas you need to focus on and it is planning for the long-term, nothing is ever set in stone and life can change in a heartbeat. The results and graphs can show you various scenarios throughout your life and the impact they may have on your finances.

Once we provide the results and recommendation, it is up to you to decide on the next step. As life can be ever-changing and unpredictable at times, we feel it is important to review your cashflow status every one to two years or should your circumstances change. So, as you have your monthly planning habits, an annual check-in on your cashflow plan will help give you peace of mind knowing you are using your money wisely and as best you can to achieve your goals.

Apart from mapping out a financial plan for the future, it is also a good opportunity to review any existing life policies or pensions you may have. Once you give signed instruction to a provider, your adviser can contact the life and pension companies on your behalf for further policy details. If you would like to see more information on cashflow planning, just visit www.drumgoolebrokerage.ie/planning.

Did you know....?

Did you know... Multi-Claim Protection can pay out multiple times for different illnesses over the lifetime of the policy and it can also trigger multiple claim components for one illness.

Did you know... Life insurance pays out a lump sum if you die or suffer a critical illness (depending on the type of cover you hold). 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.

Did you know... When you apply for life insurance, you may be asked to complete a medical exam and the life company will pay for this medical exam. It might be a good opportunity to avail of a complimentary check up!

Did you know... Key Person Insurance is a business-specific life insurance (also known as Business Protection) which can compensate a company for the financial loss and other consequences of the death or serious illness diagnosis of a key member of the business.

Did you know...  Income Protection policies and some Life Assurance policies allow you to claim tax relief at either standard tax rate (20% or 40%). This means if you are paying €100 monthly, you may get as much as much as €40 refunded on this premium

Did you know... When structuring life assurance for cohabiting clients and their family, it is important to remember that cohabitants have no automatic rights to their deceased partner’s assets under the Succession Act. By setting up an individual Life Assurance policy on the other person (i.e. Life of Another) with the premiums being paid from their individual bank accounts, this can help avoid a potential inheritance tax bill.

Did you know... If you are self-employed, Shareholder/Directorship Protection is an arrangement between company directors, which allows for a deceased’s directors share of a company to be bought by the remaining Directors.

Did you know... by reviewing your Mortgage Protection policy, you may be able to obtain more cover and additional benefits for the same or reduced price than with your original policy.

Did you know... the application process has become a much easier process these days with the availability of editable PDFs and Docusign …one pro to come out of the current situation!

Did you know... For any change in lifestyle (e.g. New house, starting a family) it is a good practise to review your financial needs and check if you are fully covered or to see where you may require additional protection.

Opportunity knocks…

Recently a client who has a Mortgage Protection policy through my agency, missed a direct debit for his premium. This can happen for any number of reasons and is easily rectified. In this scenario there are usually two options; pay the outstanding premium or take out a new policy.

So, I gave him a quick call to let him know but just before I phoned, I checked my system to see if there was a better alternative available. I did a quick review and I was able to offer his family more cover and additional benefits at a reduced price.

The main reason for this is because at different times major life assurance companies will add benefits to policies and have special offers available to me as a broker that I can then pass on to my clients. This is particularly beneficial for clients of mine who have initially taken out their Mortgage Protection policy through a bank or went directly to a life assurance company. Quite often when I review policies that clients have taken with these companies, I can offer them more value for their money.

It is a very straight-forward process to apply for Mortgage Protection. I email an editable PDF application to the client and when I receive the completed application form back, I upload it to a system which sends the client a link to complete a digital signature. This is as simple as typing in your name and is a secure way of signing your application.

This digital application tool has been in the pipeline for some time, but social restrictions over recent months has pushed companies to make this option available now. So, although I may not be able to meet face-to-face, the option to complete an application has become a much easier process!

Additional Life Cover

Question: I’ve just had my third child and have been advised to put some insurance in place, but after making some enquiries, I’m pretty confused and have a limited budget. What’s the difference between Life, Serious Illness and Permanent Health insurance?

Answer: Yes, insurance is an important consideration, especially when you have people who will be financially dependent on you. Understanding the benefits of each of these types of insurance can be confusing at times. As a guide, Life Cover pays out a lump sum in the event of your death. There are generally two types; one that lasts for a specific number of years called Term Assurance and a Whole of Life alternative which can provide family protection, protection of your estate and business protection (until death). If you are self-employed, Life Cover can also be used to ensure the financial survival of your business in the event of the death or serious illness diagnosis of a director or key employee (Key Person Insurance). Mortgage Protection is also a form of Life Cover which decreases over time as the policy is designed simply to pay off the balance of your Mortgage should you pass away.

Serious Illness cover pays out a lump sum if you are diagnosed with a specified serious illness during a determined number of years. The list of defined illnesses can vary from company to company but generally most major illnesses like cancer, multiple sclerosis and stroke are covered. It can be taken out on its own or alongside Life Cover. It can also help subsidise a missing income if you or your spouse/partner are unable to work due to illness or disability.

Permanent Health insurance is more commonly called Income Protection and it effectively replaces some of your income (up to a max. 75%) if you are unable to work for an extended period of time due to an accident or illness. This type of policy provides you with a regular income, starting after a deferred period (from four to 52 weeks) with the potential to continue until you retire depending on your health. Affordability is obviously an important factor and your age, current health and the amount of money you want to be insured for all impact the cost.

Conclusion: For any change in lifestyle (eg. New house, starting a family) it is a good practise to review your financial needs and check if you are fully covered or to see where you may require additional protection. One call to your financial broker can help you understand the options available and to ensure you are spending your hard-earned money appropriately.