Family life insurance

How would your family manage financially if you weren’t around? While it’s not a nice thing to think about, it is important. If you want peace of mind that your loved ones are taken care of in the future, we’ll help you choose the right life insurance policy for you.

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What is family life insurance?

Family life insurance is a general term for any life insurance policy you take out that can provide financial support to your family if you die. Just to be clear, it isn’t a specific product.

Life insurance can be a welcome safety net if you want to make sure your family can pay off the mortgage, clear outstanding debts and manage everyday bills after you’ve gone. Some of the money could even be put away to help pay for your children’s future expenses, like university or a car.

You can combine life insurance with other products, such as critical illness cover, to cover your bills if you’re unable to work.

How does family life insurance work?

Family life insurance typically pays out a lump sum to the people that matter the most to you if you die during the length of the policy – known as the ‘term’.

You’ll choose the amount of cover you’d like your family to receive and the named beneficiary - the person the money will go to – typically your spouse, partner, or children. You’ll then make monthly payments to the provider to pay for the cover.

The agreed pay out amount, known as the ‘sum insured’, can be fixed or vary over time, depending on the type of policy you choose.

Types of life insurance that can protect your family

There are three main types of life insurance policy to choose from:

  1. Level-term life insurance pays out an agreed fixed lump sum that stays the same, no matter when you die during the policy term. If you die after the term has ended, your beneficiaries won’t receive anything.
  2. Decreasing term life insurance offers a pay-out amount that decreases over time. It’s designed to cover long-term financial commitments like a mortgage because, as time passes, your family will have less to pay off if you die. It’s generally cheaper than level term insurance.
  3. Whole-of-life insurance, also called 'life assurance', doesn’t have a fixed term so will pay out whenever you die. As there’s a guaranteed pay-out, it tends to be the most expensive life insurance option. 

How can I find the best life insurance for the whole family?

It’s important to research different types of life insurance thoroughly to work out whether it’s suitable for your family and offers the right level of cover. The best life insurance for young families may be different to the best life insurance for older families, for instance.

Family life insurance could be suitable for:

New parents

Pregnancy and the joy of becoming new parents also changes your priorities and responsibilities. As a young family, the last thing you want to think about is death. But if the worst should happen to you or your partner, knowing there’s financial protection in place to help bring up your little one can lighten the heavy burden of money worries and ‘what ifs’.

Families with older children

When you consider sports, hobbies, and activities, as well as possible uni fees, raising older kids and teenagers can be much more costly than when they were little. Life insurance could help protect your family home, as well as covering the ongoing costs growing children incur, until they’re ready to fly the nest.

Stay-at-home parents

Life insurance isn’t just about covering the earnings of the main breadwinner. Stay-at-home parents make a valuable contribution to family life too. Think about what would happen if the working parent suddenly became solely responsible for the children. They would either have to arrange childcare or reduce their hours to look after the kids. A life insurance pay out could give them vital financial support so they can choose the best course of action for your family’s continuing needs.

Single parents

Worrying about how your family would cope financially can be even more of a responsibility if you’re a single parent and sole breadwinner. Life insurance could offer a vital financial safety net to those most precious to you if the worst should happen and you’re no longer there to support them.

Homeowners

Buying your first home can give you an amazing sense of achievement, but it’s also a massive financial commitment. If you were to die, the right life insurance policy could cover your mortgage payments and ensure that your loved ones remain living in the family home. 

Should I take out a single or a joint policy?

Single life insurance

Couples, as well as single parents, can take out a single life insurance policy, although each policy will only cover one person. You can name your partner, children, or other family members as beneficiaries.

If you intend your partner to use the money to care for the kids, it’s better to name them as the beneficiary. But if the main reason for taking out life insurance is to make sure your children are provided for in later life, you might be able to write your policy in trust. Once your child comes of age, they will be able to take control of the money, and the pay-out won’t have an inheritance tax charge added to it.

If you and your partner each have single life insurance policies, they’ll pay out separately if you both die within the term of the policy. So if you both named your eldest child as the beneficiary, they would receive two pay-outs.

Joint life insurance

If you’re married or in a long-term relationship, you have the option of taking out a joint life insurance policy. Both of you will be covered by the same policy. This should cover the financial contributions you both make to the family, including any future childcare costs if one of you died and the other had to go back to work.

Joint cover will only pay out after the first person dies. There’s no second payment if the other joint policyholder dies later. If you both die at the same time, the money is usually added to your estate, unless you’ve written the policy in trust.

How much does life insurance for families cost?

Life insurance uses several barometers to establish how ‘at risk’ you are from dying during the term of your policy. The cost of your premium will depend on your age, general health, lifestyle (like whether you smoke) and the amount of cover you want.

A joint policy tends to be cheaper than buying two single policies, and the younger you are when you take out the policy, the less you’re likely to pay for cover. You’ll need to keep up with your monthly payments to help make sure you’re protected.

Our easy-to-use life-insurance calculator can help you work out how much cover you might need.

How to compare family life insurance

We can help you compare life insurance in minutes to find the right policy for you and your family. You can use our simple comparison tool to compare both single and joint life insurance quotes.

Just give us a few details about yourself and the amount of cover you need, and we’ll send you a list of potential providers to choose from with a guide price. Your chosen provider will ask you a few more questions about your health to give you a more specific view on cover and price.

Author image Kara Gammell

What our expert says...

“If you have children, life insurance is crucial. Especially when you consider the fact that, according to Child Bereavement UK, one in 29 children lose a parent before they finish full-time education. But while many of us get some life insurance cover through our employers, it’s often not enough to provide a safe future for our families.”

- Kara Gammell, Finances expert

Frequently asked questions

How often do I need to update my family life insurance policy?

It’s a good idea to regularly review your life insurance cover to make sure it still meets your needs. If your circumstances change – for example, if you have more kids or get a bigger house with a bigger mortgage – you can usually increase your cover. It’s likely to mean that you pay a higher monthly premium, but your family’s growing needs will be covered.

What happens to family life insurance in the case of divorce?

It depends on the type of policy you have. If you’re the single policyholder, and you want to change the main beneficiary from your ex to someone else, it’s usually quite straightforward to do. It can be more complicated if the life insurance policy is written in trust.

If you have a joint policy, you should check to see if it can be split into single cover. Alternatively, the policy is cancelled, and both of you will need to find new cover.

Find out more about life insurance and divorce.

Can I get life insurance for my kids?

You wouldn’t normally get a standalone life insurance policy for your children. But it can often be worth paying a bit extra to add children’s critical illness cover to your own policy. Having this type of insurance means that if your child falls ill or develops a serious condition covered by the policy, you’ll receive a lump sum pay-out to help care for them.

What are the alternatives to family life insurance?

Life insurance isn’t your only option. There are a number of other products that can offer family protection.

  • Family income benefit pays a set monthly income instead of a lump sum. It acts as a replacement for your salary and will cover a set term – for example, until the mortgage has been paid off or the children have left home.
  • Critical illness cover can be added to your life insurance policy or bought as standalone cover. It will pay out if you’re diagnosed with a specific illness listed in your policy.
  • Death in service cover is offered by some employers as part of their employee benefits packages. It pays a multiple of your salary as a lump sum to your beneficiaries if you die while on the payroll.

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