Family life insurance
Family life insurance can give you peace of mind that your loved ones will be taken care of when you’re no longer here. Read our guide on choosing the right family life insurance policy for you.
What is family life insurance?
Family life insurance isn’t a specific product, but a general term for any life insurance policy that provides your family with financial support if you die.
Life insurance can offer a safety net to help your family pay off a mortgage, clear outstanding debts and manage everyday bills after you’re gone. The money could also go towards your children’s future expenses, like university or a car.
By combining life insurance with other products, such as critical illness cover, you can also have a buffer to help pay your bills if you’re unable to work.
How does family life insurance work?
Family life insurance typically pays a lump sum to your loved ones if you die during the term of the policy.
You choose how much you’d like your family to receive and who you’d like to be the named beneficiary – often a spouse, partner or children. This is the person who receives the pay-out when you die.
As the policy holder, you make monthly payments to your insurance provider to cover the premium.
The agreed pay-out, known as the ‘sum insured’, is either fixed or can vary over time, depending on the policy you choose.
Types of life insurance that can protect your family
There are three types of life insurance policy to choose from:
- Level-term life insurance - designed to pay 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 a pay-out.
- Decreasing term life insurance - offers a decreasing pay-out as the policy term progresses. It’s designed to cover long-term financial commitments, like a mortgage. The idea is that as time passes, your family will have less to pay off. The decreasing pay-out means it’s generally cheaper than level-term insurance.
- Whole-of-life insurance - often called ‘life assurance’, doesn’t have a fixed term and should pay out whenever you die, provided you’re still paying the premiums. As there’s a guaranteed pay-out, it tends to be the most expensive life insurance option.
There are pros and cons to each type of cover, which we’ve highlighted below:
Level-term insurance
Pros
- The lump sum paid out will be exactly what was agreed when the policy was set up
- Your family will receive the full lump sum pay-out if you die within the policy term
- It can provide a lifeline to cover your family’s ongoing living costs and expenses.
Cons
- It tends to be more expensive than decreasing-term life insurance
- Your family won’t receive a pay-out if you die after the term has ended
- The pay-out remains fixed and won’t increase in line with inflation.
Decreasing-term life insurance
Pro
- Tends to be a cheaper type of life insurance cover
- Can cover the cost of repaying your mortgage, which decreases over time
- Good option to protect your family’s finances if you’re on a tight budget.
Cons
- The pay-out could be quite small towards the end of the policy term
- Won’t pay out if you die after the policy term has ended
- Might not leave your family anything to cover expenses aside from a mortgage.
Whole-of-life-insurance
Pros
- Guarantees your family a pay-out no matter when you die
- Not subject to capital gains tax or income tax
- Pay-out can be used to help cover inheritance tax.
Cons
- Tends to be the most expensive type of life insurance
- Policies can be complex
- Might not be suitable if your needs change.
Who needs family life insurance cover?
Family life insurance could be suitable for:
New parents
Taking care of your family when you die is the last thing any new parent wants to think about. But knowing that you have financial protection in place can ease the burden of money worries.
Families with older children
Clothes, hobbies, cars and uni fees all add up, making older kids and teenagers more expensive than little ones. Life insurance can help cover the costs of raising your children until they’re ready to fly the nest.
Stay-at-home parents
Life insurance isn’t just about covering the main breadwinner’s earnings. Stay-at-home parents make a valuable contribution to family life too. And if they died, a life insurance policy could help the remaining parent cover childcare costs or reduced working hours.
Single parents
Financial pressures can feel even greater if you’re a single parent and sole breadwinner. Life insurance can help ensure your children will be taken care of financially if you’re no longer there to support them.
Homeowners
A home is a massive financial commitment – and one that your family might not be able to take on without you. If you were to die, the right family life insurance policy could cover your mortgage payments, so your loved ones can stay in the family home.
How can I find the best life insurance for the whole family?
Comparing quotes and cover is the best way to make sure that your family life insurance can take care of your loved ones when you die. When shopping around, think about:
- Is the pay-out enough to cover your family’s financial needs?
- Are the monthly premiums affordable?
- Do you want to be covered for the duration of your life or a fixed term?
- Do you want the pay-out just to cover your remaining mortgage or ongoing expenses?
- Do you want your life insurance policy to build cash value?
- Do you want to add extras like critical illness cover?
Should I take out a single or joint policy?
Whether you take out a single or joint policy will depend on your personal circumstances. Joint policies can often be cheaper, but things could get tricky if you were to divorce or separate. Here’s an outline of each:
Single life insurance
Single life insurance policies cover just one person – the named policy holder. You can name your partner, children or other family members as beneficiaries, who’ll receive a pay-out if you die within the policy term.
If you have a partner who intends to care for the kids after you’re gone, it might make sense to name them as the beneficiary. But if you’re seeking family life insurance to make sure your children are provided for, you can write your policy in trust.
Writing your life insurance in trust means your children receive a pay-out once they come of age. It also means the money won’t be counted for probate or inheritance tax purposes.
If you and your partner have single life insurance policies, both will pay out if you die within the policy term. If you both named your children as the beneficiaries, they’ll receive two pay-outs.
Joint life insurance
If you’re married, in a civil partnership or in a long-term relationship, you can take out a joint life insurance policy. This means the same policy covers both of you.
This type of family life insurance should cover the financial contributions both of you make to your household. Remember to also factor in the cost of childcare if one of you dies and the other has to go back to work.
Joint cover is often cheaper, but it only pays out after the first of the two policyholders dies. There’s no second payment when the other policyholder dies.
If you both die at the same time, the money is usually added to the estate of the youngest, unless you’ve written the policy in trust.
What are the alternatives to family life insurance?
Aside from family life insurance, there are a handful of other options that could provide your loved ones with a vital financial lifeline, including:
- Family income benefit - provides a monthly pay-out, instead of a lump sum. It acts as a replacement for your salary for a set term: for example, until your mortgage has been paid off or your kids have left home.
- Income protection, previously known as ‘permanent health insurance’, can provide a monthly payment to cover a proportion of your salary – typically half to two-thirds – if you’re injured or become too sick to work.
- Critical illness cover can be added to your life insurance policy or bought as a standalone product. It pays out a lump sum if you’re diagnosed with an illness that’s covered by your policy.
- Death in service cover is offered free of charge by some employers as part of an employee benefits package. It pays a pre-agreed, lump-sum multiple of your salary if you die while on the payroll. For example: if you earn £40,000 a year and the agreement is five times your salary, your beneficiaries get £200,000.
How much does life insurance for families cost?
The cost of your premium will depend on a number of factors, including your age, health, lifestyle – if you’re a smoker, for example – and how much cover you want.
Joint policies tend to be cheaper than two single policies. And the younger you are when you take out the policy, the less you’re likely to pay for your premium.
With Compare the Market, 51% of our customers received a quote of £175[1] per year for a pay-out of up to £100,000. 51% of non-smokers under 30 received a quote of £42.00[2] per year for £100,000 of cover.
Our easy-to-use life insurance calculator can help you work out how much cover you need.
Compare family life insurance quotes with us today.
[1] 51% of our customers were quoted less than £174.60 per year for their life insurance for a 10-year term, up to £100k worth of cover and no critical illness cover in September 2024.
[2] 51% of our under 30-year-old, non-smoker customers were quoted less than £42.00 per year for their 10-year decreasing term life insurance policy, up to £100k worth of cover, no critical illness cover in September 2024.
How to compare family life insurance plans
We can help you compare life insurance in minutes. Use our simple comparison tool to compare both single and joint life insurance quotes.
Just give us a few details about yourself and how much cover you need, and we’ll send you a list of insurance providers to choose from. Your chosen provider will then ask you a few more questions about your health and lifestyle to give you a more tailored quote.
What our expert says...
“If you have children, life insurance is crucial. Especially when you consider that, according to Child Bereavement UK, one in 20 children lose a parent before they finish full-time education. While some of us get life insurance cover through our employers, it’s often not enough to provide a safe future for our families.”
- Tim Knighton, Life, health and income protection insurance 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 meets your needs, especially if your circumstances change. You can increase your cover if, for example, you have more children or buy a more expensive house. It’s likely you’ll have to pay a higher monthly premium, but your family’s growing needs will be covered.
What happens to family life insurance if I get divorced?
It depends on the type of policy you have. If you’re a single policyholder and want to change the beneficiary from your ex to someone else, this is usually quite straightforward. It can be more complicated if the life insurance policy is written in trust.
If you have a joint policy, you might be able to split it into two single policies. The other option is to cancel the policy and find new cover separately. You can find out more about how divorce affects your life insurance by checking your policy’s terms or speaking to your insurance provider
Can I get life insurance for my kids?
Standalone life insurance policies don’t typically cover children. But it can be worth paying extra to add children’s critical illness cover to your policy. That way if your child falls ill or develops a serious condition covered by the policy, you should receive a lump-sum pay-out to help care for them.
