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 to take care of your loved ones’ future, we’ll help you choose the right life insurance policy for you.
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’. During the application process, you’ll choose the amount of cover you’d like your family to receive. You’ll also have to decide who you want to nominate as beneficiary to receive the payout. Typically, the beneficiaries would be your spouse or partner, and children or any other dependents. You’ll then make monthly payments to the provider to pay for the cover, known as your insurance premium.
If you die during the policy term, your family will receive the agreed pay-out amount. This 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:
- Level-term life insurance pays out a fixed lump-sum no matter when you die during the policy term. You choose the amount when you take out the policy and it stays the same throughout the term. If you die after the term has ended, your beneficiaries won’t receive anything.
- 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.
- Whole-of-life insurance doesn’t have a fixed term so will pay out whenever you die. Because there’s a guaranteed pay-out, this tends to make it the most expensive life insurance option. You can’t buy this type of cover on our site, although some <over 50s life-insurance policies> [link to page] also include whole of life cover. Alternatively, our partner LifeSearch, a specialist adviser for life insurance, will be able to help you. Give them a call on 0800 072 1147. Lines are open: Monday to Friday: 8am-8pm, Saturday: 9am-2pm, Sunday: 10am-3.30pm
What do I need to know to find the best family life insurance for me?
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 you if:
- you've recently had children or have a little one on the way
- you have older children to put through school and university
- you’re a single parent with children that depend on you to pay the bills and provide for them
- you’re a homeowner with a mortgage that needs to be paid off each month
It’s worth remembering that 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. So, 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.
Should I take out a single or a joint policy?
Life insurance can either be taken out separately, as a single life-insurance policy, or by a couple as 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 will 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 family life insurance 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.
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.
Likewise, if you get divorced, you may be able to split a joint policy into single cover. Some life-insurance providers will need the consent of both joint policyholders for this to happen. Check your policy details carefully to see if the policy offers a ‘separation benefit’ so that it can be divided. If not, one of you may be able to take over the joint policy as a single policy. Alternatively, the policy is cancelled, and both of you will need to find new cover.
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, until your children have left school or university or until your scheduled retirement age, for example. Premiums can be cheaper than standard life insurance as the provider will have less to pay out if a claim is made later on in the policy.
- Critical illness cover can often be added to your life insurance cover for an extra cost, but you can also buy it as a separate policy. It will pay out if you’re diagnosed with a specific illness listed in your policy. Some critical illness policies include cover for your children, so if they fall ill you may be able to make a claim. You can get critical illness cover both as an add-on to your life-insurance policy, which we can help you with, or as a standalone policy, which we currently don’t compare.
- Death in service cover is a type of insurance offered by some employers as part of their employee benefits packages. Your beneficiaries will be paid a multiple of your salary as a lump sum if you die while on the payroll. If you leave the company that provides the cover, it will end at the same time as your employment.