By Dave Kavanagh

When people take out cover, such as life cover or serious illness cover, it is usually for a specific term, such as 10, 20 or 30 years. When these terms expire, the cover usually ends. People can ap-ply for new cover but their health at that time may prevent them from getting cover again or could include a premium rating. This is why having a conversion option is an extremely valuable bene-fit. It allows the person to extend their cover without having to provide any new medical details, so they are guaranteed to be accepted for cover (assuming they were accepted at ordinary rates when they first applied). It’s hard to know what your requirements will be in 10 years, never mind 20 or 30 years, so if you are taking out cover for the first time, it is important to make sure that you will have the flexibility in the future should you require it. For anyone that has cover in place, do you know exactly when it is due to expire? Do you know if it has a conversion option? It is far wiser to check and make sure you know these details now, rather than leave it until it is too late. If your health has deteriorated since you originally took out cover and you do have a conversion op-tion, it may be well worth looking at converting it now, as cover is more expensive the older you are, so you can lock in a lower premium and future proof yourself by getting the best value for your cover. In many cases, a lower level of cover may be sufficient as the financial loss that would have occurred 20 years ago may be reduced, for example, children may have grown up and moved out. Another aspect to consider, is if you were a smoker when you first took out cover. If you have been a non-smoker for over 12 months, you may be entitled to substantially reduced premiums.

Dave Kavanagh QFA has been advising people financially for over 25 years. For quotes or information (with no cost or obligation) he can be contacted by emailing info@financialcompanion.ie or use the contact form on www.financialcompanion.ie or phone 087-6414570, or @Davekav_advice on Twitter and Instagram. Combined with his previous role of gym/nutrition adviser, he regularly gives talks and workshops at seminars and events for groups, companies and government departments on financial wellbeing,

By Dave Kavanagh

We often see that on top of the more compulsory car and home insurance, that many people also have travel insurance, pet insurance, mobile phone/laptop insurance etc. When we ask about insurance on their most important and valuable assets, themselves, (outside of mortgage protection), it is often something that was never considered, despite the potentially enormous financial loss that would occur in the event of a fatality (especially when there are children to consider!). We understand, it’s not the most fun conversation to have, but the reality is these things happen all too frequently and often unexpectedly. For example, a couple with young children and an income of €50,000 per annum, who in the event of a fatality of one of the parents, could suddenly have to live on the state’s survivor’s pension, giving them a massive drop in income and lifestyle. Worth mentioning that the loss would be the same when there are young children whether it was an income earner or a homemaker, as the income earner would either be gone, losing their income, or have to give up work to raise the children. Surveys have shown, that the actual cost of cover is far cheaper than people expect, and there is a variety of options to suit people’s specific circumstances. Plans can either be selected based on levels of cover in relation to the financial loss that would be suffered, or tailored based on affordable premiums. If this is something that you have been considering, don’t keep putting it off. Contact your financial advisor to get quotes. In many cases these days, cover can be arranged over the phone with digital signing.

By Dave Kavanagh

Making a little time occasionally to go through your finances and budgeting, can be very rewarding and leave you with more money left over each month. A few practical tips:

Carefully study 3 months’ bank statements. Make sure that you can account for every single trans-action. On a regular basis, I encounter people who have been paying for things that they should not be, direct debits they forgot to cancel.Make a detailed list for grocery shopping (and don’t shop while hungry). This leads to only buying what you actually need, a lower bill at the till and less throwing out of food gone off.Compare before you shop for larger items. Just because one store has a fridge you want reduced from €950 to €850 in their “Sale”, does not mean another store nearby that does not currently have a sale on, is not selling the same one for €799. Compare utility providers. Whether it’s electricity, gas, broadband, mobile phone service or similar, there can be substantial savings to be had by switching to better deals. Check when car/house insurance renew-als arrive. Don’t automatically accept a renewal premium without checking around. A few phone calls could save you hundreds of euro.Review premiums on life cover/mortgage protection/serious illness cover. Especially if you arranged it directly with a bank or insurance company that could not compare.In over 20 years of helping people with their finances, I have never seen anyone NOT make savings by doing the above. If anyone would like the free budget spreadsheet in excel format that will calculate totals as you input them, just email info@financialcompanion.ie with Budget in the subject line. Happy saving!

By Dave Kavanagh

In an ideal world, people should plan to have savings for different requirements. Short term savings is aiming to have about a month’s salary put by, for things like the washing machine breaking down or similar. Medium term is aimed at planning for things that will be happening in a year or two, such as needing to change the car, having a wedding or having a special holiday (when we can again!). These might require 3-6 months’ salary. Beyond these is what is referred to as long-term savings. This is usually aimed at a period of 5 years or more. It can be anything from saving for children’s third level education to planning to buy a mobile home. The main difference with this time frame is that it opens up more options to try and get some reasonable growth on your savings.

As most people know, bank deposit accounts pay little or nothing in terms of interest. In some cases with certain balances, they are actually charging negative interest, meaning they charge you for minding your money! Savings plans that utilise investment funds are a fast growing option for people that want to get the best out of their savings. They are managed by experts that use a variety of investment types within their funds, such as equites and bonds. Your level of risk is assessed, and a fund or choice of funds that matches your requirements is used. With regular savings, the great part is that every time there is a fluctuation in fund value, you get more units for your premium that month. In the long term, these funds usually way out perform bank deposits. Plans can be tailored for your specific requirements. Talk to your financial advisor to find out more.

By Dave Kavanagh

Something that I have recommended for many years to clients, is to set up an “ICE” file, (In Case of Emergency). Preferably in either a metal filing cabinet or any container that is fire resistant (some have even used a strong biscuit tin, but only after the biscuits are gone!). Then make sure at least one trusted friend or family member is aware of where it is kept in the home. This way, in the unexpected event of either a fatality, severe illness or even early onset dementia, it removes the confusion of trying to establish details like what bank accounts are there, what cover (if any) is in place, is there a will made? I often hear of situations where a surviving partner says “oh he/she always dealt with all of that, I haven’t got a clue.”So what kind of things should be kept in it?

Consider the kind of information that would be needed at such a time. Details of bank accounts, any loans due to be paid, details of any mortgage and any associated cover in place that could clear such a mortgage. Any life cover details (and any contact names/numbers in connection with them). Details of any regular payments that should be cancelled, such as gym membership, magazine subscriptions, etc. The benefit of having cover plans/ wills in pace is diluted somewhat if nobody knows that they exist or where the details are.

By Dave Kavanagh

In 2019 in Ireland, there was €455 million collected in Capital Acquisition Tax. This covers both inheritance tax and gift tax. It also includes estates that may have been taxed in previous generations. For example, if someone left an estate worth €2,000,000 to an only daughter, she would (in the current tax year) have a tax bill of almost €550,000. After she pays the bill and puts what’s left in the bank, any interest is taxed (DIRT). Guess what happens when she passes and leaves her estate behind? It’s taxed again! Spouses can leave any amount to each other tax free. After that, the three thresholds are, a) Children - €335,000, b) Other close relatives - €32,500 and c) All others (including cohabiting partners) - €16,250. Everything received above these is taxed at 33%.So, is there any way to avoid it? There are two main actions that can either reduce or eradicate such a tax bill. The first is to take the time to plan when making a will. Let’s say a value of €750,000 was being left to 2 adult children. (Not a big estate if you combine a house, savings and a life policy). This would create a tax bill of over €25,000. Instead, if €670,000 of it was left to the 2 children and the balance between a few grandchildren, there is no tax bill. The second thing that can be done is for the person leaving the estate to take out a Section 72 plan. This is a type of life policy that is allowed to pay any tax liability without adding to the value of the estate. It becomes particularly important for anybody that does not have children to plan things out, as even other relatives can only receive €32,500 before any balance is taxed. Make the time to plan.

By Dave Kavanagh

There are many aspects of life that people take for granted, especially if it’s something that is long running and gets paid by direct debit from your bank account. I regularly see clients that have had the same cover plans in place, without ever checking if they are still suitable for their current circumstances. Changes in employment, income, new additions to family, or moving home are just some of the things that could completely alter your requirements. You could even be paying for something that is no longer required or needed. If a plan was taken out directly with a bank or insurance company (where it was not compared) you could be paying premiums way higher than necessary.

What kind of details should people be aware of?

For a start, just knowing the basics would be helpful. With things like life cover, mortgage protection or serious illness cover, what premiums are you paying? How much cover is in place? When is the plan due to expire? Does it have a conversion option that would allow you to continue cover beyond the end of the plan if your health deteriorated? Is it “dual” or “joint” cover? If you pay for income protection, has your salary reduced or increased over the years? Are you paying for levels that you may no longer be able to claim for? While it may not be the most “fun” exercise, taking some time to examine the details of anything you may have in place, is usually very worthwhile. You may save yourself money but you will also have the peace of mind that what you have in place is the most appropriate for your circumstances.

By Dave Kavanagh

When compared to home-owners, people who rent where they live can be a lot more vulnerable. Apart from the obvious points, like rents being increased or having to move out if a property is being sold, there are other potential events that could prove problematic for renters. For home owners, an unexpected temporary loss of income, whether due to illness or occupational difficulty, may mean that they need to make an arrangement with their lender until their income returns to normal. Even in the event of a fatality, the mortgage protection in place will clear the mortgage, leaving the surviv-ing partner (if there is one) not worrying about mortgage payments. Renters don’t usually have any such protection in place. If a loss of income meant rent could not be paid, they would most likely be evicted. With the current levels of rent so high, if one of a couple renting passed away, it may not be affordable on one income. So, can renters protect against such eventualities?Yes, firstly, having income protection in place, which pays out an income if someone cannot work due to illness or inju-ry and suffers a loss of income, would make sure that rent could still be afforded, preventing a pos-sible eviction. Also, in the same way that home-owners have life cover in place to clear a mortgage in the event of a fatality, renters can do the same, with the payout allowing them to purchase their own property mortgage free. Serious illness cover also pays out a lump sum on diagnosis of one of the specified illnesses, which could also be hugely helpful to renters. Premiums for such cover plans, especially for younger renters can be a lot cheaper than people often think. If you rent, it would be clever to give some thought to these.