How much life insurance does a family in Ireland actually need

The sum assured is a choice your family makes together

The family sum assured is a choice — and the right number is the one where what is ideal meets what is affordable. What you are putting in place is a lump sum that, if it is ever called on, can be drawn down by your family to create an income while life adjusts.

The ideal value depends on your household’s circumstances and on who depends on your income. For some households the goal is to provide right through to retirement age — replacing the lost income for as long as it would otherwise have been earned. For others the goal is more modest — a lump sum that carries the family through while life finds a new direction. Both are valid choices. The right one for your household depends on how dependent the family is on the earned income, what other resources are in the background, and what the surviving household’s working pattern is likely to look like.

What is possible will be dictated by the budget that can reasonably be allocated to the premium. Life insurance is a risk management product that may never be called on — it should not leave any family stretched to pay for in the meantime. The ideal level is the one you would put in place if cost were not a factor. The affordable level is the one the household budget can sustain without strain. Where those two meet is the right sum assured.

Term length — match the policy to the people who depend on you

The term is the period of time the cover will be in place. The common approach is to set the term to cover the period during which someone depends on you financially.

Where there are children in the family, that is often the period until the youngest child reaches the end of financial dependency — commonly the end of undergraduate third-level education, age 21 to 23, though some households set the horizon earlier at the end of secondary school. For a household with younger dependants the term will be longer; for a household with older dependants the term will be shorter. Where the dependency is open-ended, the term may run all the way to retirement.

Level term, with a constant sum assured throughout the term, is the usual product structure where the goal is to provide for the family. The cost of providing for a household does not decrease over time. Decreasing-term cover is shaped for a mortgage that is reducing — it is the wrong shape where the goal is family provision.

Indexation — protecting the real value of the cover

A level-term policy issued for twenty-plus years pays the same nominal sum at year twenty as at year one. In real terms, inflation has eroded the value. Indexation — commonly 3% per year on sum assured — preserves the real value of the cover over the term. The premium also rises annually, typically by 5% (the premium increases at a faster rate than the sum assured because the same percentage uplift on cover at an older age is more expensive to provide).

For a young family with a long term, indexation is usually worth taking. For shorter-term cover — ten years or less — the cumulative inflation drag is smaller, and indexation can be omitted to reduce premium. The trade-off should be deliberate, not default.

Joint life or two single policies

Where two adults in a household both want cover, there is a choice: a single joint life first-event policy (pays out once, on the first death) or two single-life policies (each pays out independently, both can pay). The premium for two single-life policies is materially higher than a joint life first-event policy at the same sum assured, but the cover is also materially better: a single tragic event affecting both lives pays out twice, not once.

For households with dependants, many couples choose two single policies rather than joint life. The cost differential is manageable, the cover is structurally more robust, and the policies are individually portable if household circumstances change. A joint life policy issued to a couple that later separates is administratively awkward to unwind.

Where Section 72 fits — a specialised structure, not the default

Section 72 of the Capital Acquisitions Tax Consolidation Act 2003 allows a specifically-structured whole-of-life policy to provide proceeds that, when applied to pay inheritance tax on the estate, are exempt from CAT. It is a specialised structure for households where the underlying need — paying CAT on a substantial estate — actually applies. It is not the default approach to sizing family life cover and it is not a replacement for the term cover this guide is about. Where it might be appropriate alongside your term cover, raise it with a QFA.

Cover the second adult, not just the earner

Where there are two adults in a household and one earns less or does not earn at all, it is easy to under-insure the second life. The non-earning or lower-earning role often provides unpaid work that has a real economic value — caring for dependants, household support, school logistics, all the work that is not paid for in cash but is paid for if absent. A common Irish estimate puts the annual replacement cost of full-time unpaid household labour at €35,000–€50,000.

The case for covering the second adult is just as important as covering the higher earner, and is more often missed. The same ideal-meets-affordable conversation applies — what level of cover does the household want in place for this life, and what level is the budget able to sustain alongside cover on the higher earner. The two policies are sized together, not separately.

How mylife.ie helps families size cover

mylife.ie is a whole-of-market intermediary regulated by the Central Bank of Ireland (C42382). The mylife chat is the first port of call — it can walk you through this conversation, surface the relevant trade-offs and answer most of the common questions in your own time. Where you would prefer to talk things through with a person, a QFA-qualified adviser is on hand to take you the rest of the way. We compare the five regulated Irish life offices: Aviva, Irish Life, New Ireland, Royal London Ireland and Zurich Life.

The mylife way is to use our granular understanding of the market and of policy conditions to find you the very best policy to suit your individual circumstances. We then look at pricing and, where possible, ask your chosen provider to match their pricing to that of the lowest-cost provider for an equivalent level of cover in the market. Every case reviewed by a QFA.

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