What Are the Types of Personal Insurance?

Personal insurance can feel like a minefield when you’re first looking into it. There are different policy types, different triggers, different payout structures and it’s not always obvious which one applies to your situation.

The good news is that each type of personal insurance has a fairly clear purpose. Once you understand what each one does, it becomes much easier to figure out what you actually need. Here’s a straightforward breakdown.

How Many Types of Personal Insurance Are There?

There are five main types of personal insurance worth knowing about in Ireland: 

• Mortgage protection
• Serious illness cover
• Term life insurance
• Whole of life insurance
• Income protection. 

Each one covers a different risk, and many people will have more than one policy at the same time.

Let’s look at each one in turn.

Mortgage Protection

Mortgage protection insurance is specifically designed to cover your mortgage repayments if you’re unable to pay them due to circumstances covered by your policy. In Ireland, it is a legal requirement for most new mortgage holders, your lender will typically insist on it before approving your loan.

The core purpose is simple: if something happens to you, such as a serious illness, an injury or death, the policy ensures your mortgage continues to be paid, protecting your home and your family.

There are different types of mortgage protection policies. These are:

• Decreasing term protection, the most common, which mirrors a repayment mortgage. The cover reduces over time as your outstanding balance falls.
• Level term protection, which keeps the same payout throughout. This can be useful if you have an interest-only mortgage.

Important! In Ireland, mortgage protection is a legal requirement for most new mortgage holders. Your lender will typically insist on you taking out a policy before approving your loan – and they’ll often recommend you a provider to get you started.

Mortgage protection is often one of the first insurance products people take out, so you might feel it’s easiest to stick with your lender’s recommendation and get your policy confirmed sooner rather than later. However, it’s worth shopping around to see if you can get lower premiums or more appealing terms elsewhere. 

The bottom line: if you’re unable to meet your mortgage repayments due to illness, injury or death, this is the policy designed to step in.

Serious Illness Cover

Serious illness cover, sometimes known as critical illness cover, is designed to help you out after a diagnosis of a serious health condition. The exact conditions covered vary by policy, but if your condition meets the criteria, you’ll receive a lump sum tax-free to help support you and your loved ones.

Common conditions covered include:

• Heart attack
• Stroke, aneurysms and embolisms
• Cancer
• Major organ failure and transplants
• Serious neurological conditions
• Some permanent disabilities.

It’s important to read the small print carefully, as cover is only triggered by diagnoses that meet the policy’s exact definitions.

Once received, the lump sum is yours to use however you need to, from clearing a mortgage and covering private medical treatment to adapting your home or simply replacing income while you recover. There are no restrictions on how it’s spent, which makes it a flexible form of protection. 

Serious illness cover is often added as a rider to a life insurance policy, but it can also be taken out as a standalone product. Crucially, it doesn’t require you to be unable to work, it pays out on diagnosis alone.

Term Life Insurance

Term life insurance pays a lump sum to your beneficiaries if you die within a specified period, the ‘term’ of the policy. If you survive to the end of the term, the policy ends with no payout. For a deeper look, our complete guide to life insurance covers this in more detail.

It’s one of the most straightforward and affordable forms of life cover available. You choose the term length — typically 10, 20 or 25 years — and the level of cover you want, and the premium stays fixed for the life of the policy.

It’s a popular choice for people with dependants, a mortgage or other financial commitments they want to protect. The idea is to hold the cover for the years when your death would cause the most financial hardship, typically while your children are young or your mortgage is still significant. 

Because term policies have a fixed end date, they tend to be considerably cheaper than whole of life cover, making them one of the most cost-effective ways to protect your family during your highest-responsibility years.

Whole of Life Insurance

Whole of life insurance does just what it says: it covers you for your entire life, rather than a fixed term. As long as you continue paying your premiums, your beneficiaries are guaranteed a payout at the time of your death, no matter when that actually happens.

Because the payout is guaranteed, premiums tend to be higher than term life insurance. However, whole of life policies are often used for estate planning purposes. For example, some people use them to leave an inheritance, cover inheritance tax or provide certainty for dependants with long-term needs.

Some whole of life policies include an investment component, where part of your premium is invested to build a cash value over time. Others are purely protection-based. 

The key distinction from term cover is certainty: where term insurance may or may not pay out depending on when you die, whole of life always will. It’s worth understanding exactly what you’re buying before committing.

Income Protection Cover

Income protection insurance pays a regular income if you’re kept out of work due to an illness or injury. Unlike the lump sum products above, this one replaces a portion of your salary — typically up to 75% of your pre-disability income — on an ongoing basis until you’re able to return to work, or until the policy term ends.

It’s particularly valuable for self-employed workers who don’t have access to employer sick pay, but it’s equally relevant for employees whose employer-provided sick pay is limited or short-term. Premiums are also tax-deductible in Ireland, which makes it a more accessible option than many people initially realise.

Not sure which type of cover is right for you? Our team at askpaul can help you find the right fit for your circumstances. Book a protection consultation here.

This article is for general information purposes and is not an invitation to deal or address your specific requirements. Any expressions of opinions are subject to change without notice. The information disclosed should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Protection premiums are subject to a completed application form and the provider may require additional health screening information. This further information and assessment may increase the cost of cover.