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What Type of Insurance Should I Get? Your Insurance Primer

There are almost as many different types of insurance available as there are insurance brokers. This can be daunting for almost anybody looking to insure themselves, their loved ones or their prized possessions against harm. Sometimes the confusion can even lead to anxiety and delays in purchasing adequate cover – which, if fate strikes at an inopportune moment, can lead to disaster.

What is insurance?

Insurance has historically been used to hedge against risk. Whether there was a danger of sunk shipping, death on-the-job or theft of a precious heirloom, the goal remained the same: avoid financial ruin, and compensate for losses. The modern insurance industry, in Ireland or elsewhere, provides its customers with the same service.

Why is insurance important?

Insurance is important, then, because it protects people against losing things they can’t afford to – financially, emotionally, or otherwise. If you are in a car accident, insurance companies recommended by a broker like Campion shoulder the task of assigning fault, and can pay for damage taken or incurred appropriately.

If you are travelling and suddenly fall sick, lose luggage or even have to cancel the whole trip due to unforeseen circumstances, travel insurance at various price points can cover your medical expenses, the value of your misplaced possessions or even reimburse the cost of the holiday altogether.

However, many young people prefer to take the risk of going without insurance for unforeseen problems when it comes to their vehicles or their mini-breaks and only pay for the most minimal cover, if at all. Of course this often works out just fine (except for when it doesn’t!) but even misfortune in these cases seldom leads to complete disaster – we only rarely spend potentially ruinous amounts of money on a car or a holiday, after all.

Why is home insurance important?

Unfortunately, there is one area of life where we are exposed to risk at a magnitude higher than any other: our homes. A person’s home is an island of security, where all of one’s most important possessions are kept: passports and other documents, musical instruments, souvenirs, technology and expensive kitchen appliances. 

Especially for young people in their twenties and thirties, just setting their foot upon the first rung of the property ladder, suffering an unforeseen mishap without homeowners insurance can leave them facing a financial cliff-edge. So however unlikely disaster might be to strike, it’s always worth taking out some form of protection

The cheapest homeowners insurance packages cover either just the contents or just the bricks-and-mortar value of a home. The former usually covers one against fire damage and burglary, among other circumstances, while the latter concerns physical damage to the property from various sources and is sometimes required for or built into a mortgage package. 

Usually, the buyer has the option of choosing the value to which their property will be insured, high or low – so while you run the risk of significant losses in a totally disastrous situation, cheap homeowners insurance with a low premium is always better than nothing, and provides some hedge against risk.

More comprehensive but not-quite-as-cheap homeowners insurance – so-called “building and contents insurance” – covers (you guessed it!) both your property and those possessions of yours that reside permanently within it. This is the safest way to insure yourself and your loved ones against losses from the broadest range of sources.

Obviously, the specific insurance package you choose to purchase is entirely your decision. Insurance’s utility lies in the way it protects against risk – and it’s up to each of us to decide how much risk we can afford to take. Homeowners insurance, however, seems to be a particularly good hedge against a big financial shock, however slim the chances are of one occurring. 

Campion Insurance provides free quotes on a wide range of insurance products.

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Important Assumptions

For the purpose of determining the term over which pension contributions are made, we have assumed your birthday was exactly six months ago.

If your target retirement age is lower than the age at which the Social Welfare pension commences (age 68 if you are born on/after 01/01/1961, age 67 if born before this date but on/after 01/01/1955 and age 66 if born before 01/01/1955) the calculations allow for funding for this gap, in addition to the cost of the annuity.

You are entitled to a full Social Welfare pension of €248.30 per week as at March 2019 which is assumed to increase by 2.5% per year.

You are saving for the difference between the Social Welfare pension and your target monthly income in retirement.

We have allowed for inflation of your target monthly income of 2.5% per annum between now and your retirement date.

Any other private pension provision you may have in place has not been taken into account.

Your monthly pension contribution increases by 2.5% each year up until your retirement age and is invested in a pension plan with an annual management charge of 1% and a 5% charge on each contribution, in line with the Standard PRSA fees and charges maximum limit.

A Gross Investment Return of 4.2% per annum on your savings. This is not a forecast because the value of your investment may grow at a faster or slower rate than assumed and the value of your investment may be expected to fall from time to time as well as rise.

On retirement you purchase an annuity which escalates at 1.5% each year, has a 5-year guarantee and is payable monthly in advance. The annuity rate assumes a post retirement interest rate of 2% per annum and no spouse’s pension. The actual annuity rate will depend on the selection of dependant’s pension, guaranteed period and the escalation rate, as well as interest rates prevailing when the annuity is purchased.

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