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Life insurance for new parents

When you become a parent for the first time, protecting your little one and securing their future becomes top priority.

It’s no wonder that many new parents take out life insurance for the first time after the arrival of a baby. Find out why.

When you become a parent for the first time, protecting your little one and securing their future becomes top priority.

It’s no wonder that many new parents take out life insurance for the first time after the arrival of a baby. Find out why.

Written by
Tim Knighton
Life, health and income protection insurance expert
Last Updated
23 OCTOBER 2023
6 min read
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Why life insurance is important for new parents

Not being a part of your child’s future is something you never want to imagine.

But the grim reality is that every 20 minutes in the UK, a parent dies, leaving dependent children, according to the Childhood Bereavement Network. This means on average, 127 children lose their mother or father every day.

Parents depend on each other in ways that go beyond earning a salary and paying the bills. In many cases, the surviving parent may have to leave their full-time job to care for the kids. Or if they continue working, the cost of extra childcare needed would become very expensive.

Life insurance for new parents could at least offer some reassurance, allowing you to enjoy your new family life without the niggling worry of ‘what if something happens to me?’. You’ll know that your nearest and dearest should have some financial protection if you weren’t around anymore.

How much life insurance cover do I need as a new parent? 

There’s no one-size-fits-all answer. It’s something you have to sit down and work out.

Bringing up a child to the age of 18 can cost a lot of money. Depending on what statistics you read and what is and isn’t included, you could be looking at well over the £150,000 mark.

But you shouldn’t just think of the cost of bringing up a child. It’s a good idea to factor in your outgoings now and in the future, so if the worst happened, your costs could be covered.

A lot will depend on your financial situation. Think about:

  • Your mortgage – any loans and other large outstanding debts that could be a burden if the main breadwinner died.
  • Monthly outgoings – like utility bills and other costs of running a home and a car if you have one.
  • Loss of earnings – if the bereaved partner had to give up work to care for the children.
  • Childcare costs – if the main carer died.
  • Educational costs – even if you’re not thinking about private education, there could be school uniforms, school trips, extra-curricular activities and maybe university or college fees further down the line to consider.
  • All the usual costs involved with bringing up a child – clothes, food, toys, activities, days out, holidays, birthdays and Christmases, to name a few.

To give you a rough idea of how much you might need in total, it’s often recommended that the target life-insurance pay-out should be at least 10 times your annual salary.

If your outgoings can be covered, and you’d prefer to leave a lump sum for your child to access when they’re older, you might want to consider setting up your life insurance in trust.

What’s the best life insurance policy for new parents?

If you’re looking for life insurance for young parents, start by deciding which type of life insurance cover you want. You might want to consider:

Level-term life insurance

This is a fixed policy for a set period of time – the ’term’. You choose the pay-out amount and the length of the policy term. Your family will get a lump sum for exactly the same amount, whether it’s paid out at the beginning or towards the end of the policy term.

The main benefit of this type of policy is that you know exactly how much your family will get if you died.

But when the policy term finishes, the cover will stop. That means it won’t pay out if your death happens after the term has ended. Also, usually there’s no cash-in value at any time during the term of the policy and if you stop paying, the cover will stop.

Decreasing-term life insurance

This could work out cheaper than a level-term policy because the value of the policy decreases over time. So, after a claim near the start of the policy, the pay-out will be much larger than after a claim towards the end of the policy term.

Sometimes known as mortgage life insurance, it’s often used to cover repayments for debts such as a mortgage or a loan, which normally decrease over time.

The downside of this type of policy is the pay-out might become smaller, just as you have to spend more on your children’s needs. Your outgoings include more than just your mortgage.

Top tip

It’s important to make a will as a new parent. If you die without a will, your estate will be subject to intestacy law. This means the courts decide who will get what.

Writing a will also allows you to appoint guardians for your children if you or your partner should die. If you don’t have a will, the local authority or courts could decide who should look after your children.

How much does life insurance cost?

The cost of a life insurance premium depends very much on your personal circumstances – your lifestyle, how old you are, your health, if you smoke and the type of policy you’re after.

But to give you a guide, 51% of our customers could achieve a premium of £4.75 per month for their 10-year decreasing-term life insurance policy – with up to £175k worth of cover, no critical illness cover, with guaranteed premiums for a 30-year-old non-smoker – based on Compare the Market data from September 2023.

We know that as new parents, your costs of living have likely risen. That’s why we’re here to help you find personalised cover at the right price. Check out the latest life insurance deals.

Do I need life insurance if I’m not the main breadwinner?

If you’re a stay-at-home parent, life insurance is definitely worth considering. Think about how your partner would cope with the costs of bringing up baby if you were no longer there. They might need to organise full-time childcare, or even cut back on their working hours to stay at home more themselves.

Will life insurance cost more while I’m pregnant?

Taking out a life insurance policy when you’re pregnant shouldn’t cost more than it normally would. 

It’s most likely that you’ve changed some of your lifestyle habits during pregnancy, like giving up alcohol and eating more healthily. Just make sure you’re honest when buying a policy. Your insurance provider will want to know about your lifestyle habits pre-pregnancy. For example, if you gave up smoking in the months before you became pregnant, you’ll still be considered a ‘smoker’ and a higher risk for insurance purposes. This, not the fact that you’re pregnant, could mean your premium is more expensive.

Me and my partner stopped smoking as soon the pregnancy was confirmed. How will that affect any life insurance we might take out?

Smokers tend to pay more for life insurance because they have poorer health outcomes. There were 506,100 attributable hospital admissions due to smoking in 2019/2020, according to the most recently available NHS figures.

For insurance purposes, if you’ve used any tobacco products in the past year, including nicotine-replacement products, you’re classed as a smoker.

But your past smoking history isn’t the only thing that affects the cost of your premium – your health and lifestyle will, too.

Life insurance for single parents

If you’re a single parent, you may want to set up a single-life insurance policy to ensure your child is financially protected if you die. This could be particularly important if you’re the sole carer and your child is completely reliant on you financially. If you’ve appointed a guardian, you could name them as a beneficiary.

It’s also worth thinking about writing your policy in trust. This can be helpful in getting any pay-out into the hands of beneficiaries quicker. It typically has the advantage that the payment is exempt from inheritance tax, depending on the circumstances.

Again, writing a will is very important. As a single parent you can set out your wishes for what should happen if you die. This could help stop any disputes between family members at a difficult time by providing more certainty about what you wanted.

What other types of insurance might I need as a new parent?

As well as life insurance, there are other types of financial protection you might want to consider for your new family: 

  • Critical illness cover – this can be added to your life insurance or bought as a standalone policy. It could offer financial protection in the form of a one-off payment if you were to become seriously ill or injured with a condition listed on your policy.
  • Income protection insurance – replaces your regular income if you’re sick or injured and unable to work. Depending on the policy, you could also cover periods of unemployment, for example, if you’re made redundant.
  • Family health insurance – while you and your family may be entitled to NHS care, a family health insurance policy could cover the costs of private treatment with the added benefit of shorter waiting times.  

Frequently asked questions

What’s the difference between life insurance and life assurance?

Life insurance will cover you for a set term. Life assurance, also known as whole of life insurance, is just that – it covers you for your whole life. When you die, the policy will end, and your beneficiaries – the people you’ve chosen to get the pay-out – will get a lump sum.

Joint or single life insurance policies – which is best?

If you’re a couple, a joint life insurance policy might work out cheaper than two single policies. The biggest drawback is that it will only pay out once. If your partner dies, you’ll receive a lump sum, then the policy will be cancelled. The same happens if you die first. 

The survivor might want to take out their own life insurance policy to make sure the child or children would continue to be financially protected.

When do I need to review any life insurance I take out when my baby is born?

You should review your life insurance regularly – maybe once a year. This can be a good idea to make sure your policy still meets your needs.

Big life events can also be a good prompt to review your policy, for example:

  • Moving home
  • Paying off your mortgage or remortgaging
  • Having or adopting another child
  • Getting a big promotion or changing jobs
  • Changes to your inheritance tax situation
  • You or your partner deciding to be a stay-at-home parent
  • Cohabiting or getting married if you aren’t already
  • Divorce or separation.

You may want to keep your existing policy and take out an additional policy to top it up, for example, or you may be able to increase or decrease your existing cover.

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