Our top tips on how to insure you and your family in 2018

Our top tips on how to insure you and your family in 2018

Do you have Adequate cover?

More and more couples in Ireland are choosing to cohabit and have children now, rather than marry. If you are one of these couples, have you spoken about ‘life of another’ family protection or personal protection?

When it comes to protecting your family its important that you have the correct cover. Do cohabiting couples have adequate and appropriate protection in the event of death?

Why do you need ‘life of another’

Cohabiting couples are treated as strangers, from an inheritance tax perspective, in the event of death. This may result in a significant percentage of a jointly owned property inherited being passed to Revenue in tax.

‘Life of Another’ Cover explained

So let’s paint the picture. Ann and Barry are unmarried and jointly own a house together, valued at €300,000. They have 2 lovely children named Jack and Jill. They have the following protection in place:

  1. Joint mortgage protection policy that clears the mortgage in the event of either of their deaths
  2. Ann also has a term life cover policy for €200,000 to provide for the children in the event of her death, which is also paid for from the joint account.

5 years later Ann dies in a tragic accident. Barry already owns 50% of the house and inherits the other 50% from Ann, valued at €150,000. What happens from a tax perspective?

  1. As Ann and Barry were not married, the threshold for property passing between them in the event of death is €15,075.
  2. The balance of €134,925 is taxable at 33%, which results in a tax bill of €44,525 for Barry.

The good news is while the Dwelling House Exemption Relief still exists this tax bill of €44,525 may be avoided. If a house which has been someone’s main residence, they may be exempt from inheritance tax subject to certain conditions (that’s a story for another day).

Tax Implications

What are the tax implications for the €200,000 term life cover policy for the purpose of replacing Ann’s income though? This is liable for tax at 33% which amounts to a massive €61,038.

What’s the solution?

If the protection policy, number 2 above, was structured on a ‘life of another’ basis Barry, Jack and Jill would have an extra €61,038 to help deal with their financial difficulties.

This structure means Barry owns the policy, makes the claim in the event of death, and since he has paid the premiums the proceeds go to him tax free.

The proceeds are paid directly to Barry, and not to Ann’s estate, and there will be no probate delay. Another important point is that there can be no claim on the policy proceeds from any relatives of the deceased.

Hopefully, Jack and Jill will see their parents grow old together, but statistics from the CSO show that at least 1 kid in a junior infant’s class of 20 kids will have to deal with the death of a parent in the next 10 years.

Ready to get started?

See what our financial planning experts can do for you.

Why would an employer provide benefits for their employees?

Why would an employer provide benefits for their employees?

Employee benefits

Employee benefits for contractors and employees vary greatly, even if they are working under the one organisation. Approximately 20% of employees have privately arranged Income Protection Insurance, and 50% of employees have sufficient levels of Life Cover for their dependents. Knowing that you and your family will be looked after should the worst happen is a valuable benefit and certainly not one that an informed contractor, employee or employer should give up easily.

 The complete benefits package

Life cover, and other additional insurance benefits, can be provided on a group basis. Group life, and in particular group disability cover, could be a key element in properly valuing and retaining loyal employees. It can also free an employer from any implied moral duty that they may feel towards their employee should they be affected by death and/or disability when they already have a solution in situ.

Why would an employer provide Group Risk benefits for their employees?
  1. An employer can write off the full cost of providing the benefits against corporation tax.
  2. It is an attractive, and relatively cheap, benefit that the employer can offer current and future employees.
  3. The underwriting requirements for group risk assurance are much less stringent than for individual policies.
  4. Typically, based on the size of the group, a not insignificant level of the cover can be provided without medical evidence.
  5. The employee’s details only need to be provided at scheme setup, and again at renewal, this makes administration a lot simpler.
  6. As the cover is organised on a group basis, costs are significantly lower than equivalent individual policies.
  7. An employee must be able to meet an actively at work declaration, which for a new scheme usually means no absences of more than three consecutive days in the previous six months.
  8. Administration for the employer is much more straightforward than purchasing equivalent policies for each individual employee.

The full range of protection products available under a group risk package include:

  • Death in Service (Life Cover) – This can be a multiple of salary or a fixed lump sum. In addition the payment can be made as a spouse’s pension or as a children’s pension.
  • Income Protection – This pays a monthly income if an employee is unable to work for a prolonged period due to illness or injury – essentially protecting the employee from loss of income.
  • Pension Contribution Protection – This ensures contributions continue to the employee’s pension plan, even if they are on long term sick leave.
  • Group Serious Illness – This pays a lump sum if an employee is diagnosed as suffering from one of number of specified serious illnesses.

Does your employer look after you and your family? Or are you the contractor, if so, you are also the employer.

For more information contact us on your choice of email or phone details below.

Top Financial planning tips on how to protect your income

Top Financial planning tips on how to protect your income

Income Protection

How would you and your family cope financially, if you were out of work for a long period due to illness or injury? Do you know how much income, if any, you would receive from your employer?

While we ensure such things as our houses, cars, even our gadgets, the most important thing you should insure is your income, as it is your most valuable asset.

If your health is currently in ‘no-claim-bonus’ territory you should not expect to pay more than the price of a good drink per week. Your government is even willing to provide tax relief on the contributions paid.

“It will never happen to me”.

Unfortunately, no one knows what’s around the corner. Serious illnesses are on the rise. One in three people expected to be diagnosed with a critical illness at some point in their lives.

In addition to this, you have a 30%, or 3 in 10, chance of being out of work for more than 90 days at some point in your working life. As much as we try to look after our health and wellbeing, some things are outside of our control.

“I could manage with social welfare payments”.

The current rate of illness benefit in Ireland is €188 per week. For most people, this is significantly less than their weekly take home pay.

However, your expenses will more than likely increase if you have medical bills to pay. Regardless of your health status, expenses such as mortgage repayments, rent, car loans, insurance, groceries and household bills will still have to be paid.

During a period of ill-health, the last thing you should have to worry about is meeting your financial commitments, as an increase in stress levels would not be beneficial.

“My employer would look after me”.

Most private sector employers don’t offer long term income protection. If you work in the public sector, you will have noticed that your sick leave entitlements have been cut dramatically over the last few years.

“I have enough in savings to get by”.

How much will you need? You may not know how long you will be out sick for or what if you are unable to return to work? Medical bills can add up very quickly and you could see your hard earned savings wiped out very quickly.

More than likely, your savings will be earmarked for something in the future such as your children’s education, new car, home improvements etc.

In a survey undertaken by Zurich life, nearly 47% of respondents reported being willing to accept a better benefits package, including income protection benefits, rather than higher wages. Employers have a greater role in helping to protect their employees financial well-being. If you are an employer, don’t hesitate to contact Infinity Financial Planning to discuss group income protection for your staff. There are tax benefits for all concerned, as well as peace of mind.

The bottom line is.

If you have financial commitments and/or a family that depend on your income every month, you need income protection. Your income and your ability to earn a living are your most important assets, as they pay for everything else.

Income Protection pays you a salary (up to 75% of your pre-disability salary) until you are well enough to return to work. This would allow you to maintain your current standard of living and meet your financial commitments.

Don’t put it off any longer, protect what matters the most – you and your family and your current lifestyle.

Ready to get started?

See what our financial planning experts can do for you.