We’ve read with interest lately some conflicting views about life cover and how financial brokers position it with their clients. Some say that most life cover is “sold” to clients and the resulting commission payments are the focus of the transaction.
Others believe that most people have too little cover, something that is demonstrated by a recent survey from one of the largest life assurance companies in the Irish market.
While both sides of the argument have merit, at Metis Ireland we have a process that we go through when advising clients on their life cover arrangements. I set out below some of the principles that we are guided by when discussing this need with clients.
1) Life Cover Pay Outs Should Not Feel Like Winning the Lotto!
Most of my clients will have heard this phrase at some stage. Sometimes we see life cover levels over and above what they should be. Sometimes the type of contract that has been “sold” is the wrong type of policy.
The job of the independent financial broker is to calculate the financial loss that would occur if a client died and then put in place the appropriate levels of cover. Of course one of the overriding principles of best in class financial planning is that all arrangements should be regularly reviewed. This ensures that plans are always current and fit for purpose.
2) There are lots of different Providers
There are lots of different companies operating in Ireland that provide life assurance. The last few years has seen something of a price war which has meant that prices have been pushed down. An independent financial broker will have access to the best price in the market all the time.
It should be noted that switching your life cover to chase the best rates is not something that we could recommend. Sure there are times when it is justified but you should always bear in mind that you need to apply in full every time and any changes in health will be taken into account. This can sometimes lead to problems.
3) Life Cover as Part of a Financial Plan
When you take out a mortgage, the Bank will insist on a mortgage protection policy. You should always shop around for this type of product to get the best price. Outside of Mortgage Protection Assurance, any additional life cover should be put in place as part of an overall financial plan.
Taken in isolation, it may become irrelevant at some time in the future. Going back to point 1 above, the life cover levels need to be established to cover a financial loss – nothing more, nothing less.
4) What is your Financial Broker Paid
We read an article recently where it was advised that you should ask your financial broker what he or she is paid for life cover. This came as a surprise to us! The Central Bank has strict rules in place, where all financial brokers and Banks MUST disclose what they earn from a Life Assurance product. Therefore, you shouldn’t have to ask, you have to be told before the policy is put in place.
5) You need Life Cover!
I’ve been in this business for 20 years and I have seen many cases where a life cover payment has meant so much in the worst of times for families. The very first policy that I put in place as an independent broker, was a life assurance policy for €1m. Unfortunately, there was a pay-out from that policy and I have seen first-hand how much difference that payment has made to the surviving spouse.
I have several different risk assurance policies myself (Mortgage Protection, Whole of Life, Term, Income on Death & Income Protection). I am probably in the “over insured” category which gives me comfort that no matter what happens my family will not be short for money if anything happens to me.
I am always happy to share my own “protection schedule” with any of our clients if for nothing else to prove that I practice what I preach!
Contact us here at Metis Ireland is this a subject that interests you and you would like to come in and have a cup of coffee to discuss your Life Cover needs in more detail.
Phone: 061 518365
Co-Founder & Director