By Dave Kavanagh
I wrote a piece a couple of years ago following a series of interactive talks I had given to a number of groups. I had broken each group into small working groups and set them a task, to work out ap-propriate levels of life cover for a 35 year old couple with 2 young children, where “John” was in full time employment and “Mary” was a homemaker with no source of income. I gave a few basic details such as income, mortgage balance, loans and savings etc. and although there were varying levels of cover suggested (ranging from €150,000 to €2,000,000 life cover) in the vast majority of cases, the groups suggested that John needs approximately double the level of cover that Mary does, being the sole income earner. Cover should be based on the financial loss that would be suffered, so once I explained that although John passing away would remove his income, if Mary passed away, John would have to either give up work (also removing his income) or have very high costs for the minding of 2 young children, as well as additional, potential costs associated with running the house, the groups then realised that the appropriate levels of cover should be about the same. So is that the reality for most couples?Obviously, there are many different family unit dynamics, one or both in paid employment, more or no children, one or both with pension and death benefits etc., and the important factor when arranging cover is to calculate the potential financial loss that could occur for your own specific circumstances. But I still see many examples that are still placing too low a value on a homemaker by not considering the financial loss that would occur in the event of that homemaker passing away. Have a look at your own levels of cover and see if this is something you need to review.
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 firstname.lastname@example.org 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