Living may be a risky business, but life insurance can protect your dependants from financial hardship in the event of your untimely death, writes Caroline Madden.

Life insurance is sold, not bought - at least so the adage goes - and indeed it is understandable that most people need a little persuasion before facing up to the possibility that they may pass away prematurely, leaving loved ones in a precarious financial situation. But how can consumers be sure that they're being sold the right type, and amount, of life cover?

Most people's first, and quite possibly only, encounter with life insurance coincides with buying their first home. Mortgage protection insurance is compulsory when taking out a home loan, and ensures that the outstanding loan will be repaid in the event of the borrower's death. While people often do not realise it, this is a form of life assurance; if you die, at least the mortgage debt will not be hanging over your family.

While homebuyers cannot avoid mortgage protection altogether, they can certainly minimise the cost by comparing prices available in the market rather than automatically plumping for the product being pushed by their mortgage lender.

"People can actually save thousands on their mortgage protection by shopping around," says Andrew Collins, managing director of the multi-agency intermediary, www.123.ie.

Even if you have already bought mortgage protection insurance through your lender, it's not too late to switch to another provider if you discover they offer a better deal, Collins says.

"But I would advise people to take out the new policy first before cancelling the other one. Don't get caught with no life insurance. Make sure you're on cover before you cancel," he warns.

Jennifer Hoban of the Irish Insurance Federation advises anyone thinking of buying a home not to leave it until the last minute to arrange mortgage protection insurance, as the approval process can take several weeks.

"If you're buying a house, get the life cover side going at a fairly early stage," she says. "You can always get it done and have it there waiting."

Mortgage protection provides reassurance that the family home will be secure even if the breadwinner dies, but additional life cover may be necessary to protect dependants from financial hardship due to loss of their income stream.

Term life insurance is one of the simplest and cheapest forms of cover and, as the name suggests, lasts for a fixed term, for example 10 years. If the insured person dies within that term, their dependants receive a lump-sum payment.

When determining how much life cover to take out, Noel Finnegan, head of underwriting at New Ireland Assurance, stresses the importance of factoring in any existing entitlements. For instance, a person may be entitled to death-in-service benefit through their employer's occupational pension scheme.

However, Finnegan says this benefit is unlikely to exceed four times the person's salary. Although this may sound considerable, it usually would not be sufficient to ensure the person's family could maintain their standard of living for long.

"Usually there's quite a need for cover over and above whatever you might have through a pension scheme," he says.

So how do you figure out how much cover is required? There are sophisticated models for calculating the lump sum needed to meet the needs of a person's dependants, he says, but a rough rule of thumb is that, for an individual up to the age of 45, life companies would recommend a maximum of 20 times the person's salary. Of course, that includes any sum available under mortgage protection and death-in-service provisions.

Collins of 123.ie says it is a balancing act between the lifestyle the person would like their family to maintain, and financial constraints: "It's that balance between the payout that you would like to receive in the terrible event that somebody passes away, versus the additional cost of your monthly outgoing."

Cost often turns out to be a key factor in the decision.

But what about young, single people whose priorities and responsibilities are different to a parent with young children? One school of thought suggests that the best time to take out life cover is when the individual is young and healthy as they will face a very low premium.

However, a more sensible course of action for someone in this situation might be to take out some form of cover that will pay out during their lifetime if they fall ill. "If you're a single person who has no dependants, you may not have someone in a position to help you if you're unable to earn an income from your occupation or if you're unwell for any extended period of time," says Finnegan.

He suggests that critical illness cover, which pays out a lump sum if the individual contracts an illness specified in the policy, or permanent health insurance (also known as income protection), which protects the individual's income if they are out of work, may be more appropriate than life cover at this stage in a person's life.

As an individual's circumstances change and they gain more responsibilities and financial dependants, their requirement for life cover will most likely increase, so it is important to review the situation regularly.

Finnegan says that opting for a convertible term insurance policy can prove valuable. Although more expensive than regular term insurance, it gives the policyholder the choice of converting their expiring policy into a new policy at the end of the term without the need to prove the state of their health at that time.

Another option is whole-of-life insurance, which is more expensive and less popular than term insurance, but has the advantage of being designed to last for the entire life of the policyholder.

Barry McCutcheon of Hibernian says it offers a guaranteed premium whole-of-life product, which means the premium will not increase over time. However, this is not always the case with other insurers so it is important to check whether the premium will be subject to review before signing up for a whole-of-life product.

Whatever type of life insurance is being considered, it is worth investigating the attractive introductory deals being offered by brokers in a bid to win new business. For example, 123.ie is offering 50 per cent off life insurance premiums in the customer's first year. But why such generosity? "Because I believe that insurance brokers take too much commission," says Collins.

"We don't have people driving round the country in company cars going out playing golf with clients," he adds. By forgoing some of their commission and structuring their cost base appropriately, they can afford to offer this discount, he says.