Worried about applying for Life Assurance because of your health?

I was speaking with a neighbour recently about Life cover and they were concerned about whether or not they would get Life cover. There were specific health concerns in their family that convinced them that they would not be able to get life assurance. I thought it might give some people peace of mind to know a few things about the medical side of a Life Assurance application.

Genetic test

Under the provisions of Part 4 of the Disability Act 2005, an insurer cannot request, take into account or process the results of genetic tests.  This applies to both positive and negative tests. The recent public discussions about the BRCA gene would probably be the most recent example of a gene that would be covered under this act.

However this exception does not change your legal obligation to provide the insurance company with full details of any symptoms experienced, non-genetic laboratory tests or investigations, treatment, and family history when answering the questions on the application form.

Other Concerns

I have spoken to people who are reluctant to send in an application because they want to improve their current health by losing more weight or giving up smoking. This is not a very prudent strategy because of the potential implications to their family if they were to pass away before reaching their healthy goal.

The important thing to remember is that until you put in an application you will never be fully sure if your current health situation will make any difference. There is a lot of incorrect assumptions about Life assurance medical underwriting that prevent people from trying to either improve on their existing cover or taking out a new plan.

There are specialised Life companies who offer Life Assurance to people who are medically higher risk but have been declined by mainstream Life companies in Ireland. I would encourage people to not let their current health situation put them applying for the Life assurance they want.

Some Life Assurance Queries

If you are in doubt as to whether or not you should review/change your life cover, you should be aware that in practically all cases, you get no benefit from remaining in your existing cover for the entire term. Hopefully the next few questions will help clarify some of the regular queries I have been receiving.

Question: When I took out my Mortgage, the Mortgage Lender insisted that I take out something called a Mortgage Protection policy, what exactly is this?

 A Mortgage Protection Policy is a Life Assurance policy. This is the cheapest Form of Life Assurance available and starts from as little as €10 per month. The cover on this kind of policy decreases over time as the policy is designed simply to pay off the balance of your Mortgage if you should pass away at any time.

Question: Other than for a mortgage, why would I want any Life Assurance?

Life Assurance should be thought of like Car Insurance in that you are not taking the cover out so that you get a financial gain. You are taking out both types of cover to protect yourself (or your family) in the event that you need to make a claim on these policies. Ideally, you will never need to make a claim on either, unless something happens that requires you to do so.

Question: Is it easy to change my Life Assurance?

Yes, it is very easy and once your medical situation hasn’t changed since you originally took out your cover, you may make significant savings for the exact same cover. Indeed you may even be able to get added benefits on your Life assurance while also saving money at the same time.

Benefits of having a Financial Adviser

Do you have to take out a new policy if you contact me? . . . . . . .

I have had great meetings with local clients over the years, many of whom had never dealt with a financial adviser. One of the things I hear is that people were reluctant to contact me because they were concerned that they might feel obliged to act on the advice I provide that may be an extra expense that they just don’t need.

As a financial adviser, one of the most important things for me to grow my business is to have a significant amount of clients on my books. As such, a person who moves existing policies to my company is just as important as a person taking out a new policy.

What is “existing business”?

If you have a mortgage, you will most likely have a mortgage protection plan. If you have had Pensions (or currently have one) in previous employments, they could very well be still sitting paid up waiting to be moved into a Plan in your own name. You may have savings or an investment policy that hasn’t matured yet or is just working away as it always has, but you have never really reviewed exactly if it is performing to your expectations.

If a client is happy with my advice (whether it is on new or old business), they have the option to move their policies onto my agency. This changes nothing in relation to the benefits of their plan. It only authorises me to contact the life office, as a person’s broker, to get information (values etc.) on the client’s behalf. I am not authorised to make any changes to the plan and the client can contact the Life office themselves directly as normal.

The benefits to a client are that they may not have a broker looking after their interest. I can keep an eye on the cost of a plan and recommend cheaper alternatives if the opportunity arises. I can keep an eye on a savings or Pension plan to make sure it’s reviewed appropriate to your needs and is invested in a fund that matches your investment goal or retirement plans.

A Story for the New Year

I met with a client (Oliver) recently who received their Pension retirement options from a major Financial Institution. They were given two options and weren’t particularly happy with either of these options. Luckily they contacted me to see if there was anything else they could do and indeed I was able to discuss a third option.

Oliver:

“When I went into the bank to discuss my Pension retirement options, the direct sales staff member was very friendly but I didn’t fully understand the Pension options they had discussed with me. After the meeting, I spoke with my brother in law about my disappointment at the options I had been given and he passed me on Oran’s number who he said was very thorough in his business dealings.

When I sat down with Oran, I showed him what I had received from the bank. During our meeting I discussed my concerns and we discussed my options in depth. Afterwards, I felt much more confident in my understanding of the options available to me. Better still, I was surprised to learn that there was another option that I could explore that had not been discussed with me when I was in with the bank adviser.

I am extremely happy that I was able to discuss my concerns with Oran. I really feel like I have a professional adviser I trust and whom I feel is looking after my best interests.”

It is important to remember that Direct Agents of large banks and Life & Pension Companies are only able to advise you on the products and services they can sell. These agents are not obliged to discuss alternative or potentially cheaper/better options. As a result, in some cases, I have spoken with people who have not received the advice or policy they really wanted.

This story is relevant for Life Assurance, Investment and Pension products that can differ from company to company. As we enter a New Year, with all our New Year promises still (hopefully) intact, maybe it’s a good time to consider if you are getting good value on your policy or receiving the best advice for your financial situation.

Clarity of Pension advice. . . . . . .

I have had numerous meetings with people locally who have contacted me because they had an experience with a door to door Pension salesman from a specified Pension provider. Some of the following are quotes used by people I have met:

• “This salesperson does not listen to what we were saying and only wanted to discuss specific things that were encouraging us to take out a policy”

• “I found this salesperson very pushy. They stated that their Pension company had the best investment funds and the cheapest charges in the industry”

Charges

A Pension policy where there are significantly high up front charges in the first few years are not always the cheapest or cost effective in the long run. In many cases there are certain bonus’s linked to these plans, but many people might not meet the criteria to benefit from these bonus’s that can distort the quote you receive.

I have sat down with several people who had been contributing to this Pension plan and after a couple of years are shocked with the value. There was one client who was shocked to learn that it stated on his Pension statement that these savage early charges would also apply to any potential increase he makes to his pension in the future.

Fund Performance

On any given month, many of the top Pension providers can say that they have one/some of the best funds in a specified field. This does not make them the best Fund manager in the market. For example a company may have a fund that did well from a specified timeframe (exactly 5 years) right now, but another company may have better fund performance figures over a 10/15/20 year period.

Confidence in saving for your Pension

If you are not fully confident or convinced by what a salesperson is saying then you should always consider getting a second opinion. A person who can only sell a pension , investment or Life assurance plan from the one company is only able to discuss these products in how their company has instructed. Different Pension providers have different charges and most of them nowadays do not do up front charges because many people might have to stop and start Pension payments as their situation changes.

Not sure? Give me a call . . . .

If you are not sure of what you are being sold or told, please do not hesitate to contact me.

What happened to my Pension savings when I moved Jobs?

If you or your partner were contributing to a Pension arrangement in a job that you have since left, then you may have Pension savings sitting paid up in your former Employer’s Pension scheme. Indeed the same may be the case if your employer was contributing to a Pension Plan on your behalf while you were working in that company.

When people change employment, many people do not think about personally taking control or moving the Pension fund that they had built up during the years working in this company. You are entitled to what is called “leaving service options” when you leave employment. These are a list of options of what you can do with your Pension Fund now that you are leaving.

In many cases one of the options is that you do not have to move the Pension savings and they can remain in this company Pension plan until you are at retirement age, at which stage you can drawdown your entitlements. But it is worth considering another option that you may be entitled to take. This option allows you to move your Pension savings from the company Pension plan to a Pension arrangement in your own name.

The main benefit to moving from a Company Pension arrangement into a Pension arrangement in your own name would be:

• All Correspondence is sent directly to you as opposed to the trustee whom in many cases is your previous employer

• You are in complete control over your Pension and do not require signoff from a third party (trustee) when you wish to move it or draw down your entitlements

• It can be easier and quicker to get information on your Pension(s) which also makes it easier to keep tabs on exactly how many Pensions you have and where they are.

Some people like to put all their Pensions into one Pension plan. While it has its advantages, it is worth noting that in some cases it can be beneficial to keep some Pension plans separate. A big reason would be if at retirement, you have only one big Pension plan, you must take your full retirement options. If you have several Pension arrangements you can draw your retirement options down at different times if it is more convenient.

Jims Story… Conclusion. October 2013

In the previous two blogs we discussed Jims Life Assurance and Serious Illness cover. Jim had originally only contacted me to review his Mortgage Protection cover, but since realised that he could properly review other areas of his finances that he had avoided for so long.

Jim had worked in several different companies over the years and didn’t really keep a track of his Pension arrangements that he had built up. The mere thought of chasing up information from different companies (even remembering which company might have one of his Pensions) wrecked Jim’s head. Who would he contact? Was there still a Pension there? Where was the Pension invested? What could he actually do with these funds, if anything?

I sat down with Jim and helped him put together some steps to help us find his Pensions. Once we had all the different Pension information on hand it was easier to advise Jim what exactly he was able to do with each Pension.

In some instances he was better off leaving his Pension where it was (Defined Benefit arrangement). In another instance he found it preferable to move the Pension arrangement into his own policy in his own name.

When moving his existing Pensions into alternative arrangements, I made sure that Jim notified the Pension Provider of all important information. Sometimes specified information is not clarified for one reason or another and it can have huge ramifications for a person at retirement, particularly in relation to their Tax free lump sum entitlement.

When we had finished the exercise Jim knew exactly what he had in all Pension arrangements and had an idea of what he might expect at retirement. He was delighted that he now had a simple way of tracking his Pension investments.