Sunday Independent: Weigh up the cost of insurance

This is a piece we wrote for the Sunday Independent (originally appeared on the 4th of May).

We buy insurance to protect something we own or value. When asked, ‘What is your greatest asset?’ many people will say their family home; the more enlightened might say it’s their health.

Wealth is clearly something which many of us value – however, some people incorrectly mistake their income for wealth.

Cashflow can have endless liabilities stacked against it, which is why believing a person making six figures is ‘wealthy’ is often wrong – when viewed in the totality of their financial position.

Assets minus liabilities equals wealth – that’s a basic accounting equation.

It’s important to have a good understanding of wealth and of what you value before buying insurance. You should also ask yourself if the insurance in question is worthwhile.

The principle of indemnity is that you can’t be insured beyond the loss you experience, and there is always the issue of the cost of insurance versus the risk of the …

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Does an e-smoker have to pay higher insurance prices like a smoker does?

Do e-cigarrette smokers get treated like regular smokers when it comes to life assurance prices? The smoking status (which is in its strictest form described as having smoked ‘any tobacco in the last 12 months’) varies from insurer to insurer. 

Irish Life: at present someone who uses e-cigarettes (ie no other tobacco-related products) is classed as a non-smoker (Please note this may change in the future).

Aviva: smoker rates

Zurich: rate “e-smokers” at +50%, assuming that they have already been off (tobacco) cigarettes a minimum of 12 months, the reason being the likelihood of these smokers returning to full smoking habit is quite high.

Caledonian: considers anyone smoking tobacco or e-cigarettes, or anyone using nicotine replacement patches, gum etc in the past twelve months to be a smoker. Smoker rates will apply to that client.

New Ireland: classes e-cigarette users as non-smokers, but this is currently being reviewed.

Friends First: smoker rates

Worth considering which company to speak to if you use e-cigarettes!

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Talking Point with Sarah Carey: the role of unions, joined by John Moynes, Gerald Flynn & Karl Deeter

I had the pleasure (and it was fun I admit) of joining Sarah Carey on talking point on Saturday. The thrust of the show was about unions (or ‘labour price fixing cartels’ as I like to call them) and their general role in a modern economy. I did try to make some fairly polarised anti-union arguments, but in truth there are always nuances and they get brushed over in any debate even when you don’t try to take a one sided approach.

The pro’s and con’s of unions are many, and some were learned first hand (I mentioned a few of them). Sarah presided well over the shower of troublemakers lovingly called ‘the panel’. John Moynes and Gerald Flynn also did a fine job of justifying the necessity for labour unions in the workplace, they even managed to do it without getting angry at me and I did try to give them every opportunity.

A special hats off to …

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Permanent Total Disability insurance explained

Permanent Total Disability cover pays out the sum assured when the life assured is diagnosed as being permanently unable to work again due to disability or sickness. Because this policy only pays out on permanent disability there is typically a waiting period of  6-12 months before payments is made, this is to ensure that the medical condition is permanent. However, in case where the medical condition is obvious payment can be made sooner.

There are two types of  PTD, a: any occupation cover, where the benefit is only paid  if the life assured is permanently unable to follow any occupation. b: own occupation cover; where the benefit is paid if the life assured is permanently unable to follow his or her own occupation.

Permanent Total Disability may not be offered to certain professions or may be offered at increased premiums, where the life assured has a higher risk of injury due to their employment. e.g. farmer, construction worker. PTD cover usually ends at 60-65 years of age.

Some life companies offer an alternative PTD cover for those who are over …

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What is ‘Permanent Health Insurance’?

Permanent Health Insurance is an insurance which may be optional or required in relation to a housing loan.  PHI can be arranged as an individual or as part of a group scheme organised by their employer or a trade union. PHI is to provide an alternate income in the event that the individual suffers a loss of income by being unable to work due to sickness or disability lasting longer than the “deferred period”.

This period is typically 26 weeks (although it can be as low as one day or four weeks), so the policy does not pay out until the 26 weeks have passed. The payments are liable for income tax, under the PAYE system, however the policy premiums qualify for income tax relief at the individuals marginal rate, up to a limit of 10% of total income.

The payments could continue until the individual returns to works or the policy cease date is reached, which might be at the age of 60 or 65.

An optional extra usually offer with PHI policies is a “waiver of premium” (wop), …

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What is ‘serious illness’ or ‘specified illness’ cover

Serious illness (sometimes also called specified illness) is a  type of cover that pays out in the event of the life assured experiencing serious ill health. Life assurance policies may offer serious illness cover with life cover or on a stand alone basis separate from the life policy.

Serious Illness cover is also know as Specified Serious Illness, Critical Illness, Living Insurance, Dread Disease Cover. Serious Illness cover provides a tax free capital sum in the event of the insured being diagnosed as suffering from or contracting any of the serious illnesses specified by the particular policy.

The life assured must satisfy the life company that he or she has been medically diagnosed as suffering from or have contracted an illness covered by the policy, before the life company will pay out. Therefore, medical proof must be provided that such an event has happened. Typically you must also survive 14 days from the event occurring.

The serious illnesses specified by the policy will vary from life company to life company and some illnesses may be subject to “specific exclusions”.  Serious …

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Group Mortgage Protection Cover

The housing loan lender is obliged under the Consumer Credit Act 1995, section 126(1) to arrange at least one group or block policy with a life company to cover those borrowers who do not have their own protection cover.

The lender is the legal owner of the policy however the cost of each borrowers cover is passed on to them by means of increasing their loan repayments accordingly. While the lender is obliged to attempt to cover all its housing loan borrowers there are  some exceptions allowed under section 126(2) of the Consumer Credit Act 1995. a: when the house under loan is not intended to be the principle residence of the borrower or their dependants. b: borrowers who are not acceptable to the insurer or would only be acceptable at significantly higher premium rate than normal (i.e. high risk individuals or are in bad health). c: borrowers who are over 50 years of age at time of loan approval. d: borrowers who at the time the loan is made have sufficient life assurance cover that can be assigned to …

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Mortgage Protection explained

Housing loan lenders will usually insist on borrower’s  having a Mortgage Protection assurance policy as a form of collateral security.

A mortgage protection is a life assurance policy that will repay the balance of a loan on death during the loan term. This is to ensure that if a borrower dies then his/her dependants will not be forced out of their home because they are unable to continue making the loan repayments. Mortgage protection cover comes in two forms, a: where the borrower is covered by a Group or Block mortgage protection policy effected by the lender. b: where the borrower has an individual mortgage protection policy and this is assigned to the lender.

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What is Permanent Health Insurance (PHI)

Permanent Health Insurance is an insurance which may be optional or (rarely) required in relation to a housing loan.

PHI can be arranged as an individual or as part of a group scheme organised by their employer or a trade union. PHI is to provide an alternate income in the event that the individual suffers a loss of income by being unable to work due to sickness or disability lasting longer than the “deferred period”.

This period is typically 26 weeks, so the policy does not pay out until the 26 weeks have passed. The payments are liable for income tax, under the PAYE system, however the policy premiums qualify for income tax relief at the individuals marginal rate, up to a limit of 10% of total income.

The payments could continue until the individual returns to works or the policy cease date is reached, which might be at the age of 60 or 65. An optional extra usually offer with PHI policies is a “waiver of premium” (wop), this allows the premium on the policy to be waived in …

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