MoneyTimes. February 23, 2011

Posted by Jill Kerby on February 23 2011 @ 09:00



 For many parents, especially, losing their job also means losing other employment benefits such as life insurance, disability cover (also known as permanent health or income protection) which could pay up to 75% of salary until retirement age in the case of a particularly devastating illness or condition, as well as contributions towards health insurance and a pension. (Many private health insurance contracts will be honoured until the renewal date.)

Redundancy payments, where applicable, are often used to keep up some insurance payments, at least for a while, and are most usually kept up by people who are confident of getting another job quickly.

However, this great recession is proving to be quite different than previous ones, with more people experiencing longer periods of unemployment.  This is why it’s so important to prioritise your insurance payments. 

For a younger, single person, the choice is easier since they’ve no dependents and probably don’t have life insurance anyway. Health insurance is another contract they may not have; pension funding tends to begin in one’s 30s or later.

Once you have a family though, things are very different. A parent needs to take their children’s security into consideration as well as their own and while the longer term unemployed may be able to apply for a medical card eventually, these are means tested and workers with savings, redundancy funds or a spouse still working will not qualify. 

Eliminating health insurance altogether is a drastic decision (though one that may have to be taken) especially if anyone in the family has an existing medical condition; after about 13 weeks of cancellation, a waiting period will apply once a policy is re-instated if you do get another job (even one that may include the insurance as a job benefit.)  Can you afford to switch to a lower cost plan?  Can you at least afford to keep cover for the family member with a medical condition?  Would a hospital cash plan (such as HSF) be worth considering to help pay outpatient costs?

I think every parent needs life insurance, and the best way to be able to afford this important expenditure is to buy it immediately when you get married or form a permanent relationship (since many couples delay having children) and/or when you actually have the children.  Straight-forward, term life cover is still relatively cheap if you are in your 20s or 30s and over a 25 year period will seem even cheaper as your income inevitably rises. (I know one very prudent family on a very modest income that allocated their child benefit for life insurance payments.)

A fortnight ago Irish Life produced its latest figures on the amount they paid out in life cover, serious illness and income protection claims in 2010 -  €230 million to almost 8,000 families, 1,256 of which were death claims.

Malignant cancer (45%) and heart complaints (19%) remain the biggest cause of all claims, say the company, with one in ten claims made by people before they reach retirement. Breast cancer is single biggest cause of specified illness cover claims with one in three of all such claims made to people under age 40.  Meanwhile one in 10 of all deaths were due to accidents or unintended deaths (caused by someone else.)  An undisclosed number of deaths due to suicide were also paid, though policies had to be in force for at least a year.

Claims are increasing – mainly due to higher coverage – but the average size of the life insurance benefit is still worryingly low at just €65,000, especially if there are dependents. A good financial advisor can help you work out how much cover you really need:  the younger (and larger) your family the higher the sum needed, though other assets/insurance (like mortgage protection) must be taken into account. 

Another worrying development are recent findings by Aviva Health regarding the amount Irish people are smoking and how it is affecting life expectancy.

According to the company, nearly 25% of all health insurance applicants are smokers with more women (24%) smoking than men (22%), with women smoking twice as many cigarettes (23) a day than men, up from just 13 cigarettes reported last year.

While smoking does not affect the cost of health insurance premiums (which are community rates), it can, in some cases, double the cost for life insurance and reduces life expectancy by 15 to 20 years, says Aviva.  The risk of developing lung cancer for women is expected to rise by 136% by 2020 for men and by 59% for men, according to the National Cancer Registry.

These are very worrying statistics and a sign of our difficult times.  The largest concentration of smokers are in County Longford, which also has one of the highest unemployment rates.  Yet by giving up cigarettes the heavy smoker will not only improve their health (and save up to €3,500 a year) but also sharply reduce their life and protection insurance costs.

Nevertheless smokers still need to speak to a good financial advisor about the most competitive insurance rates for them, but they should then do themselves – and their loved ones – an even bigger favour by checking out the Irish Cancer Society quit smoking website (http://www.cancer.ie/quitting/tips.php) or by joining their nearest  support group. 

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