Survey shows life assurance won't last a lifetime

"Life assurance is sold, not bought." It's an old saying, but one that continues to haunt the industry. According to research commissioned by Ark Life, AIB's life and pensions company, a large proportion of Irish adults have no life assurance cover and those who do are underinsured.

"People rarely walk into a bank and say they're looking for life cover unless they need to do it to get a loan or a mortgage," says Mr Bernard Lynch, marketing manager for Ark Life Assurance. "People don't like to talk about death. There's also this attitude, that 'If I die, it's not my problem' or 'sure we have the house, we have everything we need'."

As a result, 44 per cent of married men and 41 per cent of married women do not have any life cover, according to the research carried out by Behaviour & Attitudes for Ark Life. The study is based on a sample of 284 people interviewed in AIB branches.

Ark Life believes it is "equally worrying" that most people who do have a policy are underinsured, as the sums payable on death would be far too small to meet their families' needs. Some 69 per cent are insured for less than €125,000, while 18 per cent admit to having less than €25,000 in cover.

"It's a personal question for every family. You can't just say such a person needs X amount of cover," notes Mr Lynch. But five-figure sums like €25,000 are not usually sufficient if you have any dependants.

"What seems like lottery numbers isn't actually enough to replace an income," he says.

As a general rule, however, most assurers estimate people should look at having life cover of between 10 and 15 times the salary of the main earner in the family.

Ark Life's market research has predicted how long a life assurance policy worth €100,000 would last, based on an investment return of 6 per cent and inflation of 3 per cent.

With a monthly income of €2,000, the policy would last for four years and five months after the policyholder's death. "That's €500 a week - not much left after you do the family shopping."

If a person had two or three children, they would need the money to last a decade, Mr Lynch estimates, but to make a €100,000 policy stretch to that length of time - or nine years, seven months to be precise - the surviving members of the family would have to live on a monthly income of just €1,000.

The research highlights the need for people to review their policies, according to Mr Lynch, as 68 per cent of the men and 73 per cent of the women questioned who said they had life assurance took out their policies more than five years ago.

"Over that period, the cost of living has risen considerably - as, almost certainly, have these people's commitments and responsibilities," says Mr Lynch. House prices increase, new additions arrive in the family, so "what cover they bought then might not seem so generous now."

The proportion of people without life assurance has remained static over recent years, despite substantial decreases in the cost of cover. "The cost has come down by nearly half in an environment where the word insurance is associated with increases and lack of affordability," he says.

For example, 10 years ago a male non-smoker aged 30 on his next birthday would have paid approximately €24 a month for life cover worth €150,000 over 15 years.

The same type of cover currently costs €12.68 a month at Ark Life, says Mr Lynch. "That's the price of three pints of Guinness."