Q I am 40 years old, earn €800 a week, have three children – the youngest of whom is five – and a partner who stays at home. I want to get life insurance to keep us financially secure, but how much life insurance do we need?
A It looks like your partner and children are completely dependent on your income financially and will be for many years to come.
So ideally you would consider insuring your life for your annual income (€41,600) times the number of years until your youngest is financially independent, according to Richard Cox, head of contact center and operations at People Insurance.
Given the youngest is five and expects to go to college, that would be 17, he said. Ideally, you should consider life insurance worth around €700,000, which costs around €65.51 per month, assuming you are a non-smoker.
But even a life insurance policy worth €250,000 would make a world of difference should something happen to you. Mr Cox said this would cost around €26.75 a month. It’s important to set a level of coverage that you don’t have to pay every month, he said.
Because life insurance should give you security and not cause you any worries. At the end of the day, a little life insurance is far better than none, the People Insurance manager said.
Q We are considering building an addition to our house this year and we are getting bids from contractors. From what I can see the cost of construction has increased over the last few years which got me thinking if we had to rebuild our house after severe damage would it cost a lot more than it did eight years ago? I’m wondering if this should be reflected in my home insurance – or is that based on the market value of the property?
A According to Aviva Insurance Ireland’s Brian O’Connor, your initial observation is correct and clever. The amount you insure your home for is actually based on the remodeling costs. The Society of Chartered Surveyors in Ireland (SCSI) announced in March last year that the cost of rebuilding homes had risen by over 7 per cent over the past 18 months.
Based on when you last checked your sum insured, I think it’s a safe bet that you could be underinsured by now. Luckily, there’s an easy fix – just call your insurer to increase the value of the policy. If you want to know what your new sum insured should be, SCSI has a good calculator on their website.
They also have a useful “Guide to Home Remodeling Costs for Insurance Purposes”.
Q We are both 44 and own a house in South Dublin. Our three-year fixed-rate mortgage at 2.6 percent expires in November, where we are currently paying €2,198 per month. The amount still to be repaid is around €475,000. As the house is now valued at around €625,000 we are looking for the best option to repair again. With our current provider, Finance Ireland, we may be able to continue our fixed rate but with a better LTV now at 2.3 per cent (subject to confirmation of any breakage charge). There are other options from other providers that we are considering leaving the repayments the same but with a reduced interest rate and shorter term to try to pay off the mortgage sooner. Are we crazy to consider this, or should we settle for a better interest rate with reduced payments but voluntarily increase repayments per month to get roughly the same monthly repayments we are currently paying?
A You should give Finance Ireland a 20-year fixed rate of 2.75 per cent seriously, says Joey Sheahan, head of loans at online broker MyMortgages.ie and author of The Mortgage Coach.
He said interest rates are likely to start rising as early as July. He advises sticking with the 24-year term and then overpaying across the board when you’re flush. Finance Ireland allows you to overpay 10 per cent of the outstanding balance each year without penalty.
That would be around €47,500 the first year and say €42,000 the second year and so on. If you didn’t want to fix that long, there’s a three-year fixed price of 2.5 percent with Permanent TSB and it also offers 2 percent cashback, which in your case would be around €9,500.
Mr Sheahan said it would mean you should pocket a few thousand even after paying your solicitor the legal fees for the switch.
https://www.independent.ie/business/personal-finance/your-personal-finance-questions-we-have-three-children-so-how-much-life-cover-do-we-need-41718826.html Your Personal Financial Questions – We have three children, so how much life insurance do we need?