Consider Pension Term Assurance
Michael McGovern and Hughie Doyle, Horizon Financial
Hughie Doyle, director of Horizon Financial, urges Irish people to think smart and protect themselves. Rather than rushing out to buy Life Assurance, he suggests that people look instead at the cheaper option of Pension Term Assurance.
“Life Assurance is important for two main groups of people,” explains Doyle. “Parents who want to protect their children in case of sudden death and couples where only one partner is working and the loss of that income through death would throw the family into possible penury.”
Up until now, the traditional path has been to purchase Life Assurance directly, a lot of people are unaware it is possible to purchase Life Assurance through a pension scheme. The benefits here are that the insurance qualifies for tax relief in the same way pension contributions, saving 41 cent in the euro where people are in the higher tax bracket.
“Pension Term Assurance is less well known than traditional Life Assurance as people were not aware they could use the scheme, believing incorrectly that they had to be part of a pension scheme to apply,” says Doyle. “And while there are some qualifying criteria, it represents savings of some 41 per cent or 21 per cent depending on their tax rate over traditional Life Assurance.”
People who qualify for Pension Term Assurance must be either self employed or an employee. It does not work for more than one recipient, ie. there is not joint Life cover. Also, if the person moves or changes employment out of the initial criteria, the scheme cannot be carried on. The policy is not lost though, as it can be converted into a conventional Life Assurance Policy, but without the benefit of tax relief.
In addition, Doyle advocates that the people look to buy fixed term rather than whole of life policies. “Circumstances change and whole of life policies tend to be more expensive at the beginning, which is ironic since the financial needs of most people are less as they get older, children leave home etc. However, when fixing your term, you should also allow changes to be made, in case your children stay at home longer than you originally planned!”