When do you need life cover?

Life cover has two main roles; (1) replace lost income and (2) cover large debts. While it is cheap when you are young, it is another expense that you are committing to paying for most of your working life. There are enough demands on your money, so why pay for something you don’t need. Today, we look at some major events in most people’s lives and whether there is a need for life cover.

Start Working

You have started earning your first wage. Lucky for you though, no one though is financially reliant on you. If you die prematurely, besides the cost of the funeral, no one will be out of pocket.

Move in together/ Get Married

You have met the love of your life and decided to move in together/ get married. You are both working and financially independent. While it is nice to provide financially if something should happen to you, it is not crucial, as long as you both earn a decent income.

The exception in this scenario is where people are saving up for a mortgage. It is an idea to get life cover when you are saving so if something did happen to either of you, the other person has the money to buy that home. If you are not married, be aware of potential tax liabilities. I wrote about this previously and the solution.

If you are married or in a civil partnership, you may also be entitled to the Widow’s pension, which amounts to €10,000 a year. Co-habiting couples do not get this payment.

Buy a home

When you get a mortgage, it is a requirement of the bank that you have life cover in place. In the event of one of you dying, the proceeds of the policy will be paid to the bank. If there is a surplus, this will be returned to you. The cheapest kind of cover for a mortgage is called mortgage protection cover. It is life cover plan that reduces in cover over the term of the mortgage (it usually uses an average interest rate of 6%), so at the end, the cover is zero, just like your mortgage.

If you are still working and living in a home, mortgage free, this should be sufficient.

Having kids

Everything changes now, you now have responsibilities and the costs that go with that. You have to decide how much income do you need to replace if you are no longer around to earn. Staying at home to raise the children is extremely valuable and needs to be protected. How much would it cost if you had to put your children in full time care instead?

The more children you have, the more cover you should have in place.


Now you’ve stopped earning an income, there is no lost income to replace. There shouldn’t be any debt to pay off at this stage either.  You should have accumulated assets over your working lifetime to provide an income for your dependents after your death. The exceptions are:

  1. You have a child who is financially dependent on you. You may need a whole of life policy so they have an income when you are not around to provide for them.
  2. Your children will have a large inheritance tax bill and you want to insure against it.

Life cover is something that is important but never urgent. The reason it is never urgent is because it is too late…

If you have any questions, please contact me directly at steven@bluewaterfp.ie