In most but not all circumstances life assurance is only necessary when you don’t have sufficient capital or income to survive without the deceased being around any more, although “assurance vie” can also be of great benefit when dealing with an inheritance tax bill especially if you are intending on leaving an inheritance to a non blood relative.
The average thirty something couple with a couple of kids are unlikely to have sufficient capital to deal with the prospect of one of the parents dying. For example, if the father earns €50,000 each year and the spouse, whilst trying to look after the children, manages to work a few hours a week. However should the father die, she is now €50,000 a year worse off. Does she need life assurance? I think we can all see what the answer is going to be. And what if the mother dies before the father? Father now has to arrange for daytime child care as well as covering the costs of cleaning, cooking and laundry. So there is also a strong case for covering the spouse as well.
The fact remains that very few people are planning on dying right now so why introduce another bill? Let’s look at some numbers. How much does it cost to cover an average family car for a 35 year old? Before being bombarded with quotes, let’s say it’s €500 per year. What benefit is being covered? Around €15,000, so for €500 p.a. one receives €15,000 cover. How much buildings insurance and contents cover could you get for €500 p.a.? I will guess at €150,000 buildings and €50,000 contents. This seems to be a better deal than the car at least.
With both of the examples above, the choice is not really given as you must have car insurance and most people want the security of having buildings and contents insurance. Now let’s take our couple and see how far the €500 p.a. will go to give them some life assurance. Assuming a fixed term of 20 years until their children are off their hands, this could buy both of them cover of over €130,000. In reality, this probably is not enough to cover their needs but just goes to show what benefits apply to different types of policy.
There are a number of different types of life assurance policy funded by regular or single payments. The cost need not form a large part of your budget and should be seen as essential as the premiums you pay on other insurances as your car is unlikely to pay any tax bill for you!
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Provided by Steven Grover, English Chartered Institute of Insurance qualified expatriate based in Troyes.