07 Jul, 2022

How much Life Cover is enough?

Our Farm Report 2022 found that worryingly, almost 1 in 5 (19%) have no life cover in place for their families, and another 19% don’t know how much family life cover they may have (if at all).

How much Life Cover is enough?

Family life cover is used to protect your future income, so the younger you are, the more life cover you are likely to need. The state widows’ pension (if applicable) may replace some of the lost income, and other savings can be made through the repayment of loans. So, it is likely that your full income will not need to be replaced. Each case is individual, however, as a rule of thumb, the minimum recommended life cover would be 10 times your income.

With the average annual wage in Ireland for 2020 running at €49,332, that would give a minimum recommended life cover of almost €500,000. The average farm income in Ireland for 2020 was circa €25,662. So, the minimum family life cover recommended for farmers would be €250,000.

The responses confirm what we experience when helping farming families with their financial plans. Many have life cover in place, but this is required by their lender and will be repaid to the bank in the event of a claim. Of those that have family cover, most are grossly under-covered.

We would all agree that a premature death in the family is an awful tragedy for a family to experience. Having this compounded with financial worries is a burden that can be avoided.

ESG Investing – Not as important to Farmers?

Environment, social and governance (ESG) investing is on the rise. The value of an investment is no longer just about how much money it can make you – but also about the positive (or negative) impact it can have on the world. Increasingly, companies are being judged on areas such as their community engagement, diversification of their board and their policy on climate change.

Other surveys this year show ESG factors to be important to pension investors. Amundi Asset Management (Ireland) scored 86% importance and Aviva Ireland scored 70%.

Of the respondents to our survey who have a pension, 59% felt that ESG factors were important considerably less than the other surveys.

It is possible that the blame being apportioned to farmers for greenhouse gas emissions has led to fatigue regarding environmental issues. But also likely, is the lack of awareness of the breadth and impact of ESG friendly options available to pension investors.

One thing for sure is that ESG investing will continue to be a focus for fund managers. Whether this leads to better returns for investors is yet to be shown. I suspect that ultimately, the importance of ESG investing will come down to its impact on the size of your pension pot.