Ireland Life Insurance Needs Calculator

Putting a number on a hard question

How much life cover does a family actually need? Most people either guess, copy a colleague, or take whatever the bank offered with the mortgage. The DIME method this tool uses gives a more honest starting figure. DIME stands for Debts, Income, Mortgage and Education. You add what it would cost to clear your debts, replace your income for a chosen number of years, pay off the home loan and fund the children through education, then you subtract the cover and savings you already have. What is left is the gap a new policy needs to fill.

Walking through the four pieces

Debts covers credit cards, car finance and personal loans that would otherwise fall on your family. Income is the big one: your annual earnings multiplied by the years you want to support dependants, which buys them time to adjust rather than facing a cliff. Mortgage is the outstanding balance on your home, so the roof is secured. Education is a forward estimate of school and college costs still to come. Adding these gives a total need. Then existing cover and liquid savings are deducted, because money already in place reduces what you must insure.

The method is deliberately blunt. It does not discount future income to today’s value or assume investment growth on the lump sum, so it tends to err on the generous side. That is fine for a first pass. Treat the output as a sensible ceiling to discuss with a broker, not a precise prescription.

A family with a mortgage and two incomes to think about

Consider a parent with €15,000 of debts, a €250,000 mortgage, €45,000 of annual income to replace over 10 years, and €40,000 of future education costs, holding no existing cover but €20,000 in savings. Income replacement alone is €450,000. The four pieces sum to €755,000 of total need, and after the €20,000 of savings the cover gap is €735,000.

Income replacement is plainly the dominant slice, at roughly six tenths of the total. That is the usual shape of the result, and it explains why families with young children and a single main earner often need far more cover than they expect.

How to structure the cover, and a tax point

In practice families layer two policies. Mortgage protection, which most lenders require, clears the home loan and falls as the balance does. On top of that, a level term policy holds a fixed sum for the years the children are dependent, covering income and education. Splitting it this way is usually cheaper than one giant policy. There is also a planning angle worth knowing: a payout to a spouse or civil partner is exempt from Capital Acquisitions Tax, but a lump sum left to other beneficiaries can be hit by CAT at 33 percent above their threshold. A properly arranged Section 72 life policy is designed specifically to cover an expected inheritance tax bill, and is worth raising with an adviser if your estate is large.

Should I include my partner’s income in the calculation?

Only replace the income that would be lost. If both partners earn and you are sizing cover on one life, use that person’s income, since the survivor keeps their own. Run the tool separately for each life rather than combining the salaries.

Does the cover need to last forever?

Rarely. Most family protection is term assurance set to expire when the mortgage ends and the children are independent, perhaps 20 or 25 years. Whole-of-life cover that pays out whenever you die is much dearer and is usually reserved for estate planning, not income replacement.