Can we get cover to pay rent if we fall ill?

QI THOUGHT 2017 would be the year that my wife and I could buy our own home after saving for the last four years for a deposit. However, it still seems beyond our reach as prices continually increase. So with our second baby on the way we’ve decided to put our plans on hold for the moment and remain in our rented accommodation for the foreseeable future. Our landlord is happy for us to stay on as long-term tenants. However, I’m concerned that we have no financial fallback if either of us were to be unable to pay our rent due to ill health — which is over €1,000 a month. I know if you have a mortgage you can get a mortgage-protection policy, but is there something similar for those who rent longterm? Brendan, Newbridge, Co Kildare

IT’S a very good question, and it’s a concern for more and more families in long-term rental accommodation throughout the country, whether renting by desire or necessity.

Getting on the property ladder appears to be a bridge too far for many people, with recent reports from the CSO showing a property price increase of 10.7pc in the 12 months to the end of February. In Dublin prices climbed by 8.3pc in the same period, while prices in the rest of the country were 13.2pc higher.

Unfortunately, as you are probably well aware, it’s not only prices that are rising – rents are too. In 2016, the average quarterly growth in the Dublin Rent Index exceeded the equivalent growth rate in national house prices, growing 2.2pc compared to 1.4pc. Private sector rents grew by 7.8pc across Ireland in Q4 2016 according to the latest Quarterly Rent Index from the Residential Tenancies Board (RTB). The standard national average rent in the final quarter of last year stood at €986 per month.

According to the most recent data from the CSO Census 2016, there are approximately 309,728 private rented households in Ireland. A significant portion of these would be in a similar position to you – long-term renters. I firmly agree that these people should have some sort of insurance policy to fall back on — but as it stands, there is no dedicated “rent protection” policy.

What I would advise for you to do, however, is to speak to a financial adviser about putting a life and/or specified serious illness policy in place to ensure you and your wife will be able to meet your monthly outgoings should one of you be unable to earn money in the future.

Should I wait for a rate rise?

QWITH investment returns so weak at the moment, I’m wondering if I should hold off on topping up my pension contributions until interest rates go back up? John, Swords, Co Dublin

ACCORDING to fund management company Rubicon, the average managed fund return has been 11.6pc per annum over the past five years. That definitely couldn’t be described as weak. Investment and the returns you make on them are cyclical in nature. So, any gut reaction to market fluctuations is ill-advised unless you can predict what will happen in the investment markets, which few of us can.

A diversified portfolio matched with the ideal risk strategy for where you are in your life stage cycle is the best approach. Depending on how near or far you are from retirement, your savings and investment behaviour should change accordingly.

However, consistent long-term returns are the most important issue for pension investment given that money is often being put aside for 30-40 years. You need to keep the long-term goal in mind.

People have a habit of reacting to changes in the market – buying when they hear positive things and selling when they hear negative – but smart investors should do the opposite – buy low, sell high.

The best move you could make with regards your pension planning is to get good advice. If you want to be proactive then work with an expert to assess your pension projections periodically to ensure you are on track in terms of reaching your long-term retirement goals.

Income vs illness protection

QI’M confused about the difference between serious illness cover and income protection? I’m a PAYE worker in the hospitality sector. However, I’m the sole earner in my household so I’m concerned as to how my family would be provided for if I was unable to work.

What is the difference and do I need both, or just one or the other? Jakub, Bray, Wicklow

THESE two types of cover are often confused by people, but there is one main difference that separates the two — the frequency of the payment.

Serious illness provides a lump sum payment should you fall ill (subject to T&Cs of your policy), whereas income protection will pay you a regular income for a specified period should you have to take leave from work due to illness.

It’s also worth noting that while any payment made from a serious illness policy is tax-free, Income Protection payments are not.

That said, you can receive tax relief at your marginal rate on any IP premium payments made. There is no such relief for serious illness premium payments

All providers vary in what cover they offer but in general terms, income protection covers more conditions than serious illness, and so claims on these policies are generally more frequent.

The amounts you can get cover for also vary depending on the type of policy you take out. Regulations state that you can insure up to 75pc of your income less illness benefit of €10,036 (if you qualify).

However with serious illness you are free to choose whatever amount of cover you believe is necessary.

The profile of people who take out these policies is also usually quite different.

As a PAYE worker, presumably you will be entitled to illness benefit from the State, in which case income protection may not really be as important as it would be for a self-employed worker who would not be entitled to the same financial supports.

I don’t have enough information on your individual situation to make a comprehensive recommendation — you really need to sit down with an expert and outline what your needs are, what your expenditure is and also what your affordability would be.

Is fixed or flat fee best?

QI’VE been advised that I should get financial advice from a broker who charges a fixed or flat fee rather than commission, but there seem to be very few who offer the former. Why is that? I prefer the idea of an independent adviser charging a fixed fee because he or she wouldn’t be influenced by commissions, but most advisers seem to go by commission and this surprises me. Keith, Galway city

THE market is changing a bit in this regard, with many advisers now offering the client the choice of paying a fee or taking “free advice”. Ultimately financial advice is just like legal or property expertise — it does need to be paid for somehow.

I would suggest you speak with an adviser and ask for choices.

Most people opt for the adviser taking their fees in commissions from the products as it’s more tax efficient, particularly when it comes to pensions.

Bear in mind that you could be investing up to €1m into a pension over your life time so it’s prudent to pay a few quid at the start to get the best possible advice in terms of investment, structure and ongoing fees.

It will pay in the long-term.