What life insurance does
A term life policy pays a lump sum if the life insured dies during the selected term. If the person survives the term, the policy ends with no payout. The CCPC describes term life insurance as one of the simplest and cheapest forms of life insurance compared with whole-of-life cover.
Irish Life describes life insurance as cover that can provide loved ones with a tax-free lump sum, which may be used to pay a mortgage, loans or help maintain a family's standard of living without the insured person's income.
Aviva distinguishes life insurance from mortgage protection clearly: life insurance gives dependants money for other expenses such as childcare, electricity costs and loans, while mortgage protection pays the outstanding mortgage balance. Both are important — but they serve different purposes and should generally be separate policies.
Plain-English test
A good level of life cover should help the surviving household buy time. It should give them room to grieve, reorganise work and childcare, make decisions slowly and keep essential spending funded.
How much life insurance do you need?
mylife.ie's starting point is not "match the insured person's income." The better question is: what monthly household outgoings would still have to be paid if that person died — after allowing for mortgage protection, survivor income and realistic changes in the household?
| Step | Question to ask | Why it matters |
|---|---|---|
| 1. Monthly outgoings | Is the household broadly spending €3,000, €5,000, €12,000 or another realistic amount per month? | This does not need to be a forensic budget — a broad-brush number is usually enough to begin. |
| 2. Remove mortgage if protected | Would the mortgage be cleared by a separate mortgage protection policy? | If yes, deduct the mortgage payment — that outgoing should fall away on death. |
| 3. Deduct survivor income | What after-tax income would the surviving adult actually be able to earn? | Do not assume full-time work if childcare, grief, health or business disruption would make that unrealistic. |
| 4. Add slack | Would a margin help cover the transition period? | A clean calculation that leaves no room for change is rarely practical. |
| 5. Convert gap to capital | What lump sum could fund that gap until income, assets or pension benefits take over? | The younger the family, the longer the bridge normally needs to last. |
Worked examples
| Example | Broad calculation | Indicative outcome |
|---|---|---|
| Young couple with children | Monthly outgoings €6,000. Mortgage €2,200 cleared by mortgage protection. Survivor income may be nil initially. Add €700 slack. | Gap: €4,500/month or €54,000/year. At a 6% planning rate, indicative capital: ~€900,000. |
| Dual-income couple | Monthly outgoings €5,500. Mortgage €1,800 protected. Survivor net income €3,000. Add €500 slack. | Gap: €1,200/month or €14,400/year. Cover around €250,000–€300,000 may be a practical starting point. |
| Later-career household | Monthly outgoings €4,500. No mortgage. Survivor income €2,500. Gap €2,000/month, but pension age and assets are closer. | The ideal cover may be materially lower than a young family's need and set for a shorter term. |
Affordability reality
Families often discover that the "ideal" answer and the "affordable" answer are different. The adviser's job is to show both clearly, then help the client make a sensible choice. If the real budget is €50 per month, a €500-per-month idealised solution is not a solution.
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Get your free quote →Single, joint and dual life
Single life insures one person and pays if that person dies during the term. Couples may need separate cover for both lives.
Joint life insures two people. It usually pays once on first death and then ends — no cover remains for the survivor after a claim.
Dual life insures two lives separately under one plan. A claim on one life does not use up the other life's cover. It usually costs more than joint life but can provide stronger family protection where both adults contribute income, care or household stability.
Term, conversion and indexation
The policy term should usually run until the financial dependency reduces — until children are financially independent, the mortgage is gone, pension benefits are available, or the household could comfortably self-insure.
Conversion option: mylife.ie strongly favours including this where available. The premium increase is usually small compared with the value of being able to continue cover later without new medical underwriting. The CCPC explains that a conversion option can allow a policyholder to convert to a new policy before the end of the term without new health proof.
Indexation can help cover keep pace with inflation, but it also increases the premium. It is useful when a family wants the real value of cover protected, but affordability must still be tested.
Serious illness cover
Many families consider adding accelerated serious illness cover to a life policy. It can be valuable, but it is more expensive because the probability of a claim is higher and underwriting is more involved.
The CCPC explains that serious illness insurance pays a tax-free lump sum if the insured person is diagnosed with one of the specific illnesses or disabilities covered by the policy, but it does not replace income.
| Type | What happens on claim | Practical point |
|---|---|---|
| Accelerated serious illness | The serious illness claim is paid first and the life cover is reduced by the amount paid. | Often cheaper than separate cover, but leaves less life cover after a serious illness claim. |
| Standalone serious illness | The serious illness claim is separate from the life cover. | Stronger protection, but normally more expensive. |
For example, with €150,000 life cover and €100,000 accelerated serious illness cover, a €100,000 serious illness claim would leave €50,000 payable on a later death during the term.
Keep family cover separate from mortgage cover
One of the most common mistakes mylife.ie sees is family life cover being written together with mortgage or other loan cover. This can confuse two separate interests: the family's need for money and the lender's need for loan repayment.
Where a mortgage protection policy is assigned to a lender, section 126 of the Consumer Credit Act 1995 provides that any excess policy proceeds over the amount due to the lender are payable to the surviving borrower or the deceased borrower's estate. The lender is a party to that cover. Family protection should generally sit outside bank-assigned mortgage protection so the family's interests are not mixed with the bank's.
| Do | Avoid |
|---|---|
| Keep mortgage protection for the mortgage and family life cover for the family. | Assuming a bank-assigned mortgage policy will provide flexible money for household expenses. |
| Review both policies together so the total plan makes sense. | Cancelling or replacing an assigned policy without lender approval and replacement cover in force. |
| Use separate policies where the needs, beneficiaries and assignment arrangements are different. | Combining family and bank needs simply because it seems administratively convenient. |
Switching cover
Switching life insurance can save money or improve terms, but caution is required. Do not cancel an existing policy until replacement cover is accepted, issued and in force. The CCPC warns that switching may become more expensive as a person gets older.
Extra care is needed when switching a policy that includes serious illness benefits. Illness definitions evolve, and an older definition set may sometimes be more favourable. The policyholder's health, occupation and underwriting position may also have changed since the original policy was taken out.