Family life insurance

Family life insurance can provide valuable financial protection for the people who matter most. We explore the main types of life insurance available, how each option can support your family, and the key life stages when reviewing your cover could help protect your loved ones’ future. There are three types of life insurance that could help you to protect your family

Level term assurance

Level term assurance (life insurance) provides peace of mind by ensuring that if you pass away while covered by the policy, it pays out the sum assured, agreed at implementation. This money can help safeguard your family’s lifestyle, cover daily living expenses, or contribute to mortgage payments.

Decreasing term assurance

If you are a young family and own a property, you might want to explore decreasing term assurance. This type of insurance is specifically designed to safeguard a repayment mortgage. The cover amount will decrease each year approximately in line with your repayment mortgage.

Critical illness

Consider critical illness cover if you can allocate a bit more to your monthly budget. It’s usually an add-on option available for an extra cost when you purchase level-term or decreasing-term assurance. You can also purchase standalone policies. This cover helps mitigate the financial impact on you and your family if you were to experience a critical illness. Additionally, children’s critical illness cover is automatically included, providing financial relief during challenging times.

Who should consider family life insurance?

The biggest triggers for life insurance tend to be when people get married or have children, but where do you start? There are numerous options in the UK for family life insurance policies and a good starting place would be to consider your own life situation before reviewing suitable products.

Below, we have highlighted different family situations and how life insurance can be beneficial.

Young families

If you are planning to have a baby or have recently become a parent, family life insurance is essential. As a parent, you take on new responsibilities and financial obligations. Imagine if something happened to you or your partner, would the other parent manage the financial impact alone?  

Families with older children

As your children grow up, they’ll likely have hobbies beyond school and home. Depending on your coverage amount, life insurance could assist in protecting the mortgage and covering ongoing family expenses. This includes hobbies (such as horse riding or dance classes) and educational costs like private tutoring and school fees. Additionally, a cash sum could support an elderly parent’s care if they rely on you financially.

Single parents

As the sole breadwinner and financial provider for your young family, you carry significant responsibility. While it’s difficult to contemplate, have you considered who would care for your dependents and what financial support they would require if something happened to you? Life insurance provides peace of mind, ensuring that your children would be financially cared for in such a situation. The policy could pay out a cash sum to support them as they grow up.

New couples

While life insurance might not be relevant at first, as a relationship evolves and you decide to live together, considering a single or joint life insurance policy makes sense. Especially if both incomes contribute to household expenses.

Here’s the difference:

Single life insurance 

• Covers one person. 
• Pays out upon the insured person’s death. 
• Provides peace of mind for your partner’s financial security.

Joint life insurance 

• Covers both you and your partner. 
• Pays out when the first person passes away. 
• Note that the cover ends after the first payout. 
• Remember, having two separate single policies ensures coverage for each individual, even if the relationship changes.

Homeowners

After securing your home and spending money on mortgage fees, solicitors, estate agents, and renovations, adding life insurance might seem overwhelming. But consider this: could you or your partner afford to keep the home if one of you passed away without financial protection?

Here are your options:

Decreasing life insurance (for repayment mortgages):

• The coverage amount decreases in line with your repayment mortgage. 
• Ideal if you have a repayment mortgage.  

Level term life insurance (for interest-only mortgages or general protection): 

• Provides financial security for your loved ones. 
• Pays out a lump sum for the sum assured, which is in line with the repayment of the mortgage in full. 
• Consider this if you want to protect your family. 
• Remember, it’s about peace of mind.

A summary of the benefits of getting life insurance for your family 

• Peace of mind: knowing that life insurance provides financial protection for your loved ones. 
• Premiums can be affordable: if you are in good health and establish protection early enough, then the premiums are generally low. This would depend on your coverage needs and whether critical illness is included. 
• Cash payout: a cash sum is paid to your beneficiaries, which can help pay the mortgage or rent or help with general living costs. 
• In Trust: if the life cover is placed into Trust, this would avoid the need to wait for probate and ensure that the funds are paid out efficiently, which will allow your family the time to grieve without having to think about money problems.

Conclusion

Alongside the three life insurance plans we have explored in this article, there are other plans that may be more suitable to your needs. These include family income benefit plans which pay out an annual ‘salary’ upon death of the life assured or income protection plans which provide regular payments that replace part of your income if you’re unable to work due to an illness or accident.

It is important that you consider your options and understand the different nuances of each plan. For example, critical illness plans may cover different illnesses, which can impact the cost of the premium.

If you need advice in this area, please reach out to one of our independent financial advisors who can provide advice and help you make informed choices.