Life insurance
What is term life insurance?
Term life insurance, sometimes known simply as "life insurance", pays a lump sum to a person you name (e.g. your spouse or dependants) if you die during the term of the policy. It is one of the simplest and cheapest forms of life insurance compared to whole of life insurance.
This page explains the types of term life cover available in Ireland, who may need it, what affects the cost and how to choose the right level of cover for your circumstances. It also outlines the differences between term life, whole of life and mortgage protection, plus what to consider when applying, reviewing or making a claim.
What is the difference between Term life insurance, Whole life insurance and Mortgage protection insurance?
- Term life insurance: Covers you for a set period (like 10, 20, or 30 years). If you outlive the term, the policy ends and pays nothing. For example a €100,000 policy over 10 years pays out if you die within the term. If you survive the term, no benefit is paid and the policy ends.
- Whole life insurance: Covers you for your entire life, as long as you keep paying premiums. A payout is guaranteed whenever you die. Usually more expensive because it never expires. For more information visit whole life insurance.
- Mortgage protection insurance: A special type of term life insurance linked to your mortgage. The payout reduces as your mortgage balance goes down. Designed to clear your mortgage if you die before it’s paid off. For more information visit mortgage protection insurance.
What types of term life insurance cover are available?
Single cover: Protects one person; pays a lump sum if you die during the policy term
Joint cover: Covers you and your partner; pays a lump sum on the first death during the policy term
- Dual cover: Covers you and your partner; pays a lump sum if either of you dies during the policy term
Do you need term life insurance?
You may need term life insurance if:
- Your family or others rely on you for financial or other support
- You have loans or debts your family could not pay if you died (you may already have mortgage protection insurance)
- You act as a guarantor on a mortgage
- You have a young family (more cover may be needed)
Consider buying enough insurance to:
- Give your family an income for as long as they need it
- Pay off loans or mortgage
- Cover future costs (e.g. college expenses for children)
You may not need term life insurance or may need less cover if:
- No-one depends on your income or work
- You have death-in-service benefits through your job or pension
- You have enough money for your dependants
- Your dependants could live comfortably on social welfare benefits
- You have investments or property that could provide income
- Your family is grown up and financially independent
- Your partner earns enough to support themselves and any dependants
Who gets the benefits from term life insurance?
- If you arrange a policy on your own life, the benefit is paid to your estate or named beneficiary.
- If your spouse or partner takes out a policy on your life, the benefit may be paid directly to them.
- For joint term life policies, the benefit is usually paid to the surviving policyholder.
What should you consider before taking out term life insurance?
Decide:
The amount of cover (‘sum assured’ or ‘policy benefit’)
The length of cover (‘term’)
The type of cover (single, joint, dual)
Whether you want extra benefits (e.g. serious illness cover, index-linking, conversion option)
You will need to fill in a proposal form with details about your medical history, lifestyle, family medical history, and other information. The insurer may contact your doctor for a health report.
Will you need a medical examination?
Usually only required if you have a history of illness, are over a certain age or are applying for a large amount of cover.
What restrictions apply to term life policies?
- Policies may not pay out if death is caused by a medical condition that you did not disclose or by suicide within the first year or two.
- Always answer all application questions fully and honestly.
What affects the price of your policy?
Premiums depend on:
- Amount and term of insurance
- Age (older applicants pay more)
- Smoking status (smokers pay more)
- Current and past health
- Family medical history
- Work and lifestyle risks
- Length of policy term
Some applicants may pay a higher premium (‘premium loading’) or be refused cover due to higher risk.
What extra benefits can you add?
- Serious illness cover
- Index-linking
- Conversion option (convert your policy before the end of the term without a health check)
Always read the policy terms and ask about extra costs for additional benefits.
Will your benefit be taxed?
Term life insurance pays a tax-free lump sum. However, beneficiaries may have to pay inheritance tax depending on their relationship to you and Revenue rules. A Section 72 policy can provide a tax-free lump sum to cover inheritance tax liabilities.
What happens if you stop paying premiums?
- Your policy will lapse after 30 days and you will no longer be covered.
- Some companies allow you to restart a lapsed policy if you pay missed premiums and sign a health declaration.
- If your policy has lapsed for months, you may need a new policy at a higher premium.
Should you review your term life insurance?
Review your policy if:
- Your circumstances change (e.g. children, new loans, new home)
- You change mortgage repayments or fall into arrears
- You let your policy lapse
How much will a new policy cost?
Costs depend on cover amount, term, age, smoking status, health, and lifestyle. Read more about life insurance costs.
Tips for changing your cover
- Consider getting financial advice
- Do not cancel existing policies unless necessary
- Always give full and accurate information
- Read policy details for exclusions and terms
Switching your term life insurance
- Notify your lender if your policy is assigned to your mortgage
- Agree the new policy with your lender before cancelling the old one
- Ensure the new policy is legally assigned to your lender
- Cancel your old policy in writing only after the new policy is in place
Making a life insurance claim
Steps to follow:
- Contact the deceased person’s insurer or broker (or employer for employee benefits) to find out what paperwork is required.
- Find out what you are entitled to – review bank statements and contact lenders and the employer for details of any additional cover.
- Get your paperwork in order – provide documentation such as the original policy, death certificate, will, grant of probate, or letters of administration.
