Life Insurance - How much cover should you recommend?
Identifying the level of cover required for your customer will depend on your customer’s individual needs. The level of cover required will depend on the level of income that needs to be replaced, along with any additional expenses that may be incurred
There may not be any need for life insurance, or a need for a lower level of cover, if your customers don’t have any dependents or their dependents are grown up and financially independent.
The level of cover recommended should ensure that your customer’s family’s standard of living won’t change in the event of a sudden death. It should provide enough cover to:
• Replace the gap in income
• Clear any loans or mortgage
• Ensure there is money to cover larger costs that may arise in the future: saving for third level education
• Compensate them should the surviving partner / spouse have to reduce working hours
• Cover the cost of any additional supports that may be required within the home, for example housekeeper / cleaner.
When making any recommendation to your customer, you should take into account the widow’s pension or any additional pension from an occupational pension scheme.
• Deceased earned income
• State Widow’s / Widower’s Pension
• Pension from occupational pension scheme of which the
deceased was a member
• Savings in loan repayments, where they were covered by life cover
• Any potential savings in living expenses
Once the income gap has been converted to a life cover amount, this life cover amount can be reduced by any existing life cover in place, providing the actual need.
The term of the plan being put in place will usually depend on affordability. Choosing a shorter term, for example ten years, will allow your customer to meet the full life cover need. The protection products available in the market will allow you to add a conversion option, giving your customers an option to continue the cover at the end of the term.