Bring up the subject of life assurance with a group of brokers and you will hear them deliver the well-worn maxim that life cover is sold not bought.
In the past, brokers, agents and direct salespeople were adept at selling insurance through a network of friends and acquaintances. How can you argue with your old school buddy who is offering protection for your family?
Now slick marketing techniques and finely tuned distribution networks have overtaken the neighbourhood approach but the line is just the same. If the customer is convinced he or she needs the cover, the party that suggests it will get the business.
That's all very well and will suit some people but it's not the best way to approach financial planning.
Ideally, an individual should be informed about the main features of life assurance products and be aware of the various providers in the market. Then they can initiate and control the purchasing process themselves.
Whether you are dealing with an authorised adviser, restricted intermediary, tied agent or employee of an insurance company, a quick read up on the basics of life assurance will make the experience easier and more rewarding.
Under disclosure regulations, the seller of an insurance product must reveal what commission he or she earns from the contract.
The simplest and cheapest form of life assurance is term assurance and it is a pure protection product. A term assurance policy is taken out for a set period of time - for example 10, 20 or 25 years - and guarantees to pay out a specified sum if you die during that period of time.
If you survive the term of the policy, no payment is made.
There are different types of term policies - the most simple is level-term assurance. With this cover, the lump sum paid out remains the same all the way through the term. It is not protected from inflation and will be worth less in real terms as time goes on.
Cover can be fixed or indexed at an annual rate, usually 5 per cent, with the monthly premium remaining level or increasing throughout the term.
So who is term assurance best suited to and how do you assess your needs when you go to take it out? When assessing whether you need life assurance, you have to ask yourself who would suffer in the event of your death.
Term assurance is usually recommended to a younger person who wishes to provide a suitable sum for their spouse, partner or offspring in the event of their death.
A single male non-smoker can get £100,000 (€127,000) cover index-linked for a 20-year term from £10.50 per month.
The average sum assured is around £100,000, an amount that would make a difference if a family was bereaved but would probably not be sufficient to replace lost income for too long.
The party that sells you insurance is obliged to offer to carry out a fact find on your financial circumstances to establish your needs. You can waive the right to this service but it will help to give an idea of what amount of assurance you should be aiming for.
Ms Jennifer Hoban of the Irish Insurance Federation advises that the sum assured should be reviewed regularly.
"In the case of a breadwinner, think of it as an amount that would have to replace income and support children until they are financially self-sufficient."
One rule of thumb for calculating how much cover you need is 15 times the salary. But it could be a lot less and depends on what other sources of income the household has.
Smokers pay more for life assurance than non-smokers.
A non-smoker is defined as someone who has not smoked at all in the previous 12 months. There is no distinction between occasional smokers and heavy smokers.
The cost of cover varies from provider to provider and, with straightforward term assurance, the cheapest is generally the best. The difference in premiums can be up to 50 per cent - a very good reason to shop around.
There are nine life companies that sell through brokers. In addition, AIB sells the products of Ark Life, and Bank of Ireland is a tied agent of its assurance arm, Lifetime. Scottish Life, Royal Liver and Quinn Life sell directly to the public.
Another consideration when working out the sum assured is whether the individual's occupational pension scheme has a death-in-service benefit. The payment is typically three times their salary but varies from employer to employer.
Of course, employment circumstances can change and, depending on how secure the job is, it may be prudent to disregard the benefit.
If you want to increase the level of your cover at a later date, you may have to go through the underwriting process again, which means a fresh application process with a new medical.
Mr John Geraghty of LABrokers.ie stresses the importance of reviewing your policy on a regular basis.
"The cost of life assurance has come down in recent years and it's possible to get the same level of cover today for less, even allowing for the age difference."
Convertible term assurance is a more advanced and flexible type of policy.
Like level term assurance, a convertible term policy means the assurer guarantees to pay a specified sum in the event of the death of the life assured for the term of the policy.
The one additional feature it includes is a conversion option, which can be exercised at any time during the term of the policy.
This allows the assured to extend the policy or alter it to an endowment or whole-of-life plan without having to provide evidence of good health at the time of conversion.
The benefit of this feature is that it allows someone whose health deteriorates in later life to avoid the medical checks of a renewal process.
Taking the example mentioned earlier of a single male non-smoker looking for £100,000 cover index-linked for a 20-year term, the convertible term assurance premium would cost from £10.90 a month, compared with the £10.50 for basic level term assurance.
If the assured develops a serious illness or health condition, they might otherwise find it impossible to renew cover.
With convertible term assurance you buy the certainty of getting insurance cover in the future but you will have to pay the going rate for your age.
