Financial Services FAQs:
What is life cover?
What is Life Cover? Life cover, also known as life insurance, is a policy that pays out a lump sum to your beneficiaries if you die during the term of the policy. It provides financial security for your loved ones.
Why do I need Life Cover? Life cover helps ensure that your family is financially protected in the event of your death, covering expenses such as mortgage payments, debts, and daily living costs.
How much Life Cover do I need? The amount of cover needed depends on various factors including your income, debts, living expenses, and the financial needs of your dependents. It’s often recommended to seek advice from a professional organisation such as Milford financial Services Ltd.
What types of Life Cover are available in Ireland? Common types include Term Life Insurance (covering a specified period), Whole Life Insurance (covering your entire life), and Mortgage Protection Insurance (specifically covering your mortgage).
What affects the cost of Life Cover? Premiums are influenced by factors such as your age, health, lifestyle, occupation, and the amount and type of cover you choose.
Can I get Life Cover if I have a pre-existing medical condition? Yes, but it may affect your premiums or the terms of the policy. Full disclosure of medical conditions is required during the application process.
What happens if I stop paying premiums? If premiums are not paid, the policy may lapse, and coverage will cease. Some policies offer a grace period or options to reinstate the policy under certain conditions.
What is pension?
What is a pension? A pension is a retirement savings plan designed to provide you with an income when you retire, replacing your employment earnings, that benefits from tax relief on the premium.
What types of pensions are available in Ireland? The main types are State Pensions, Occupational Pensions (employer-sponsored), and Personal Pensions (individual plans).
What is the State Pension? The State Pension is a government-provided pension paid to individuals who reach the qualifying age and meet certain PRSI (Pay Related Social Insurance) contribution conditions.
How much will I receive from the State Pension? The amount varies based on your PRSI contributions. There are two types: the Contributory State Pension and the Non-Contributory State Pension, with different eligibility criteria and payment amounts.
What is an Occupational Pension? An Occupational Pension is a pension scheme provided by your employer, which may include contributions from both you and your employer, designed to provide additional retirement income.
What is a Personal Pension? Personal Pensions are private pension plans you set up yourself, typically through financial institutions, allowing you to save for retirement independently of your employer.
What is a PRSA (Personal Retirement Savings Account)? A PRSA is a flexible, portable retirement savings account that you can take with you if you change jobs, designed to encourage individuals to save for retirement.
How are pensions taxed in Ireland? Pension contributions may qualify for tax relief, but pension benefits (income drawn from your pension) are subject to income tax. Tax rules can be complex, so advice is needed here and we can help.
Can I transfer my pension? Yes, many pensions can be transferred between different schemes or to a new employer’s pension plan. It’s important to understand the implications and possible charges involved in transferring. We can contrast and compare options giving you the knowledge to make an informed decision.
What happens to my pension if I die before retirement? Most pension plans include provisions for benefits to be paid to your dependents or nominated beneficiaries if you die before reaching retirement age.
How much should I contribute to my pension? The amount you should contribute depends on your retirement goals, current age, and financial situation. It’s generally recommended to contribute as much as you can afford to ensure a comfortable retirement. Financial advice and the finding the right pension plan are key here and Milford Financial Services Ltd. can help you with this area.
What is income protection?
What is Income Protection? Income protection is insurance that provides you with a regular income if you are unable to work due to illness, injury, or disability, ensuring you can meet your financial commitments.
Why do I need Income Protection? Income protection is crucial for maintaining your standard of living and covering expenses like mortgage payments, bills, and daily living costs if you lose your ability to earn an income.
What does Income Protection cover? It covers a percentage of your lost income (typically up to 75%) if you are unable to work due to health reasons. Policies may vary in terms of what conditions are covered and how soon after the illness or injury the benefits begin.
How long does Income Protection pay out? Policies vary, but income protection typically pays out until you can return to work, reach retirement age, or the end of the policy term, whichever comes first. Some policies have a maximum benefit period, such as two years.
What is the waiting period for Income Protection? The waiting period, or deferment period, is the time between when you stop working and when the payments start. Common waiting periods range from 4 weeks to 52 weeks, and choosing a longer waiting period usually reduces the premium.
How are premiums for Income Protection calculated? Premiums are based on factors such as your age, occupation, health, lifestyle, the level of cover, and the length of the waiting period. Higher-risk occupations and older age groups typically face higher premiums.
Can I get Income Protection if I have a pre-existing condition? Yes, but pre-existing conditions may affect your premiums or be excluded from the cover. Full disclosure of medical history is necessary during the application process.
Is Income Protection taxable? In Ireland, income protection benefits paid out to you are subject to income tax. However, the premiums you pay may qualify for tax relief of up to 40%
What is the difference between Income Protection and Critical Illness Cover? Income protection provides regular income if you’re unable to work due to illness or injury, whereas critical illness cover pays a lump sum if you’re diagnosed with a specified serious illness. Income protection covers a broader range of conditions and circumstances.
What happens if I return to work part-time? Some policies offer partial benefits if you return to work on a reduced hours basis or in a different capacity, helping to supplement your reduced income
What is serious illness cover?
What is Serious Illness Cover? Serious illness cover, also known as critical illness cover, is an insurance policy that pays out a lump sum if you are diagnosed with one of the specified serious illnesses listed in your policy.
Why do I need Serious Illness Cover? It provides financial support during a difficult time, helping to cover medical costs, living expenses, mortgage payments, or any other financial needs if you are unable to work due to a serious illness.
What illnesses are covered? Coverage varies by policy, but common illnesses include cancer, heart attack, stroke, multiple sclerosis, and major organ transplants. Always check the specific list of covered conditions in your policy. Professional advice is required here and we are more than happy to help you.
How much cover do I need? The amount of cover you need depends on factors such as your financial obligations, living expenses, and family needs. It’s advisable to assess your financial situation and seek advice from a financial advisor.
How are premiums calculated? Premiums are based on factors such as your age, health, lifestyle, occupation, and the amount of cover you choose. Smoking and pre-existing conditions typically increase premiums.
Can I get cover if I have a pre-existing condition? Yes, but pre-existing conditions may be excluded from coverage, or they may result in higher premiums. Full disclosure of your medical history is required when applying.
What is the difference between Serious Illness Cover and Life Insurance? Serious illness cover pays out upon diagnosis of a specified illness, while life insurance pays out upon death. Serious illness cover is designed to provide financial support while you are alive and dealing with a major illness. In other words, it is a living benefit.
Is the lump sum from Serious Illness Cover taxable? Generally, the lump sum paid out from serious illness cover is tax-free in Ireland, providing financial relief without additional tax burdens.
What are unit-linked investments/savings?
What are Unit-Linked Investments/Savings? Unit-linked investments are financial products that invest in various funds tailored to your attitude to investment. The value of the investment is linked to the performance of the underlying funds.
How do Unit-Linked Investments/Savings work? You invest a lump sum or make regular contributions into a policy, which is then used to buy units in your chosen investment funds. The value of these units fluctuates based on the performance of the funds meaning values can go down as well as up.
What types of funds can I invest in? Unit-linked investments offer a wide range of funds, including equities, bonds, property, and cash funds. Some also provide access to mixed or balanced funds, which diversify investments across various asset classes including ESG funds etc.
What are the benefits of Unit-Linked Investments/Savings? Benefits include potential for capital growth, a wide range of fund choices, flexibility to switch funds, with the potential to outperform deposit returns and keep ahead of inflation.
What are the risks associated with Unit-Linked Investments? The main risks are market risk (the value of investments can go down as well as up), fund performance risk, and potential charges that can erode returns. There is no guarantee of capital protection, and you could get back less than you invested. We do however, offer deposit based and capital protected options subject to availability if this is more suitable for you.
How are Unit-Linked Investments taxed? In Ireland, gains from unit-linked investments are subject to exit tax at a rate of 41% on the profit (i.e. Gains above the initial investment amount) when you cash in the policy, make withdrawals, or at policy anniversaries every eight years. Gains are not subject to annual income tax or capital gains tax.
Can I withdraw money from my Unit-Linked Investment/Savings plan? Yes, most unit-linked investments allow partial or full withdrawals. However, withdrawals may incur charges and will be subject to exit tax on any gains. Early withdrawals might also reduce the value of the remaining investment.
What happens if I die while holding a Unit-Linked Investment/Savings plan? If you die, the investment typically pays out the value of the units at the time of death, often with a minimum guaranteed amount. This payout may be subject to inheritance tax.
Can I switch funds within my Unit-Linked Investment/Savings plan? Yes, you can usually switch between funds within your policy. Some providers offer free switches up to a certain number per year, while others may charge a fee. Switching does not usually trigger a tax event.
What is the minimum investment for Unit-Linked Investments? The minimum investment varies by provider, but typically ranges from €5,000 to €10,000 for lump sum investments. Regular contribution policies may have lower minimums.
How do I choose the right Unit-Linked Investment? Choosing the right investment depends on your financial goals, risk tolerance, investment horizon, and need for flexibility. Consulting with a financial broker/advisor such as ourselves at Milford financial Servies Ltd. means we can help you assess your needs and compare different options to help you find the best fit for you.
