How much mortgage protection do I need? Calculating sum assured, term and indexation in Ireland

What you are actually sizing

Mortgage protection is a decreasing term assurance policy — the payout reduces in line with your outstanding mortgage balance over time. When a lender advances a mortgage on a residential property in Ireland, Section 126 of the Consumer Credit Act 1995 requires them to ensure that an appropriate mortgage protection policy is in place and assigned to them before or at drawdown. The lender must be named as the assignee: if you die before the mortgage is repaid, the insurer pays the lender directly to clear the remaining balance.

Three numbers define the policy: sum assured (the opening cover amount), term (the number of years the policy runs), and premium (your monthly cost). Get any one of them wrong and you may leave your lender — and your family — underinsured.

Sum assured: how to calculate

The single most common sizing error is using the house price rather than the mortgage amount. Your sum assured must equal the amount your lender is advancing — the figure on your mortgage offer letter — not the property’s market value or purchase price.

Start with your mortgage offer letter

Your solicitor will receive a mortgage offer letter (also called a loan approval letter) from your lender setting out the exact euro amount being advanced. That figure is your sum assured. If the letter shows €320,000, your policy must open at €320,000.

Top-ups and further advances

If you are drawing a top-up at the same time as the original mortgage — for example, a combined home purchase and home improvement loan — include the full combined advance in your sum assured from day one. If a further advance is planned later (for example, a future extension), in most cases you will need to make a fresh application for additional cover at that time. A conversion option allows you to take out a new policy without further medical underwriting, but does not itself increase the cover on the existing policy; the right to increase cover at defined life events is a separate feature known as guaranteed insurability, available on a limited number of contracts.

mylife.ie does not, as a rule, recommend taking out additional cover on a mortgage protection policy at the outset on the basis that it might be needed later. In the limited circumstances where a borrower has specific, near-term plans to top up the mortgage, sizing up at the outset can be appropriate — but it is an exception, not the default.

Self-build mortgages

Self-build and phased-drawdown mortgages present a particular challenge. Even though funds are released in stages — for example, 25% at foundation, 25% at wall plate, and so on — the full approved mortgage amount must be insured from the first drawdown. The insurer covers the maximum liability your lender has approved, not only what has been drawn to date. Set your sum assured at the full facility, not the first instalment.

Using an existing life policy instead

Some borrowers ask whether an existing life policy can satisfy Section 126 rather than taking out a dedicated mortgage protection policy. This is possible only if the existing policy is assignable to the lender, the sum assured equals or exceeds the mortgage amount at the date of drawdown, and the policy term runs at least to the end of the mortgage term. Whole-of-life policies and some older term policies meet these conditions; check with mylife.ie before assuming yours does.

Term length: matching the mortgage

Your policy term must equal your mortgage term — the number of years your lender has approved for repayment — not how long you intend to live in the property. If your mortgage runs for 30 years, your policy must run for 30 years. If you plan to sell in ten years, you still need a 30-year policy: the lender’s security requirement does not end because you have personal plans to move.

Cost at different terms for first-time buyers

Longer terms cost more because the policy is in force for more years and the probability that a claim will be made increases. The table below shows indicative monthly premiums for a mortgage protection policy at four common mortgage terms, for a 32-year-old non-smoker covering a €300,000 mortgage. These are real-market illustrative figures drawn from the mylife.ie quote engine across the five Irish life offices.

Indicative figures, mylife.ie quote engine, May 2026. Single life, age 32, non-smoker, €300,000 sum assured, decreasing term. Exact premiums vary by insurer and health declaration. All five Irish life offices — Aviva, Irish Life, New Ireland, Royal London, and Zurich — are represented in these ranges.

Switching mortgage to a longer term

If you switch your mortgage to a longer term — for example, extending a 20-year mortgage to a 25-year mortgage to reduce monthly repayments — your existing mortgage protection policy almost certainly will not cover the new term. You have two options: (1) arrange a new policy for the full remaining balance over the new longer term and assign it to the new lender; or (2) if your existing policy has a conversion option, contact mylife.ie to discuss whether the conversion option can be used to put a longer-term replacement policy in place.

Decreasing term, level term, and indexation

How the decreasing curve works

Standard mortgage protection is a decreasing term policy: the sum assured falls each year in line with an assumed amortisation schedule — the same kind of repayment curve that a lender uses to work out how a fixed monthly repayment progressively pays down the mortgage balance over the term. Irish insurers typically model this schedule using a fixed assumed interest rate built into the policy at outset.

The interest rate assumption used to draw the policy’s decreasing cover curve and the real-world interest rate applied to your mortgage will, almost invariably, differ — and they will move differently over time. The result is that the policy’s sum assured at any given moment is unlikely to match your actual outstanding mortgage balance exactly. This divergence is a known and expected feature of standard mortgage protection, and it is accepted by lenders as a normal characteristic of the product.

Indexation — when is it relevant?

Indexation is an optional add-on that increases both your sum assured and your premium by a fixed percentage — typically 3–5% — each year, to protect against inflation. For pure mortgage protection, indexation is almost never worth the extra cost. The whole point of the policy is that the cover decreases to match a decreasing mortgage. Adding indexation partially offsets the decrease, producing a policy that is neither a clean decreasing policy nor a true level policy — and costs more than either. On a standard repayment mortgage, indexation is unnecessary.

When level term makes sense

Level term — where the sum assured remains constant throughout the policy — is appropriate, in the mortgage context, in two specific scenarios: (1) interest-only mortgages, where the capital balance never reduces; and (2) structured finance or investment mortgages, where the repayment schedule does not follow a standard amortisation curve.

Separately from mortgage protection, level term is also the standard product structure for ordinary family protection life cover — a stand-alone policy taken out to provide a fixed lump sum to dependants on death. That kind of cover is not mortgage protection, is not assigned to a lender, and should be quoted as a separate policy alongside, rather than built into, your mortgage protection.

Joint, dual, or two single-life policies

When two borrowers take out a mortgage together, they need cover for both lives. The three structural options — a joint life policy, a dual life policy, or two separate single-life policies — each carry different sizing and cost implications. The full comparison is covered in the companion mylife.ie guide on joint versus dual mortgage protection. For sizing purposes, the key point is that each policy or life must cover the full mortgage amount, not half each: the mortgage does not halve because one borrower dies.

Mortgage protection is assigned to your lender — its purpose is to clear the mortgage on a death, not to provide a family benefit. For that reason, the most sensible choice for most couples is the lowest-cost option that satisfies the lender’s requirement. If you also want to provide a lump sum for your family’s benefit beyond clearing the mortgage, that need is better addressed by arranging a separate family protection life policy alongside — never by inflating the mortgage protection itself.

Worked examples

Common sizing mistakes

• Using the house price instead of the mortgage amount. Your sum assured must reflect what the lender is advancing, not what you are paying for the property. On a €400,000 house bought with a €320,000 mortgage, the correct sum assured is €320,000.
• Matching cover to your ownership horizon instead of your mortgage term. If your mortgage runs for 30 years, your policy must run for 30 years — regardless of whether you plan to sell in ten.
• Adding indexation to a standard repayment mortgage. On a decreasing mortgage, indexation creates a more expensive policy that is still unsuitable for pure mortgage protection purposes. It is unnecessary unless you have a specific reason for it.
• Forgetting your partner's separate cover need. Each borrower must be covered for the full mortgage amount, not half. Check whether you need a joint, dual, or two single-life structure.
• Leaving a top-up advance uninsured. If you draw a top-up at the same time as the original mortgage, include it in the sum assured from day one. A policy sized for the original mortgage alone will not satisfy the lender's Section 126 requirement on the combined advance.
• Assuming an existing policy covers a new or extended mortgage. Always confirm that any existing policy being assigned to a new lender meets both the sum assured and term requirements at the date of the new drawdown.

How mylife.ie sizes cover on every quote

When you use the mylife.ie quote engine, the system automatically applies the correct sizing logic: your sum assured is set to the mortgage advance figure you enter, and your term is set to your mortgage term — not your intended ownership period. All five Irish life offices (Aviva, Irish Life, New Ireland, Royal London, and Zurich) are quoted simultaneously so you can compare the market in one place.

A conversion option is available as an add-on and, while optional, is often a good idea: the additional premium is modest and the protection it provides — the right to take out a fresh policy at standard rates without further medical underwriting — is meaningful, particularly for younger borrowers and over longer terms. mylife.ie will discuss the conversion option on every quote and add it where appropriate. For a full explanation of how it works and when it pays for itself, see the mylife.ie guide Mortgage protection with the conversion option: why it’s worth it in Ireland. Indexation, by contrast, is not shown by default on standard decreasing term quotes — it appears only if you explicitly select it.

mylife.ie operates as SMP Financial Ltd, authorised and regulated by the Central Bank of Ireland (reference C42382). Every recommendation is made by a qualified financial adviser (QFA FLIA).

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