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Family life insurance

How would your family manage financially if you weren’t around? While it’s not nice to think about, it is important. If you want peace of mind that your loved ones are taken care of, here’s how to 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 that provides your family with financial support if you die. To be clear, it isn’t a specific product.

Life insurance can be a welcome safety net if you want to protect your family. It can help them pay off the mortgage, clear outstanding debts, and manage everyday bills after you’ve gone. The money could also 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 pay your bills if you’re unable to work.

How does family life insurance work?

Family life insurance typically pays 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 choose how much you’d like your family to receive and who you’d like to be the named beneficiary. This is the person the money goes to and is typically your spouse, partner or children. You then make monthly payments to the insurance provider to cover the premium.

The agreed pay-out, known as the ‘sum insured’, is 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:

  1. Level-term life insurance is 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 anything.
  2. Decreasing term life insurance offers a decreasing level of pay-out. It’s designed to cover long-term financial commitments like a repayment mortgage. The idea is that, as time passes, your family will have less to pay off. This is generally cheaper than level-term insurance.
  3. 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.

Who needs family life insurance cover?

Family life insurance could be suitable for:

New parents

As a new parent, death is the last thing you want to think about. But knowing that you have financial protection in place can lighten the burden of money worries and ‘what ifs’.

Families with older children

What with clothes, hobbies and possible uni fees, older kids and teenagers can be more expensive than little ones. Life insurance can help protect your family home and cover the costs of raising 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.

If the working parent suddenly became solely responsible for the children, they’d have to make hard choices. Either they’d have to pay for childcare or reduce their working hours. A life insurance pay-out could provide vital financial support, allowing them to make the right choice for their family.

Single parents

Financial pressures are usually even greater if you’re a single parent and sole breadwinner. Life insurance can offer your children a safety net if you’re no longer there to support them.

Homeowners

Buying a home is a massive financial commitment. If you were to die, the right family life insurance policy can cover your mortgage payments, so your loved ones get to stay in the family home.

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

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

Should I take out a single or joint policy?

Single life insurance

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

If your partner intends to use the money to care for the kids, it’s better to name them as the beneficiary. But if the main purpose of your life insurance is to make sure your children are provided for, you can write your policy in trust. This lets your children take control of the money once they come of age. It also means the pay-out won’t be liable for inheritance tax.

If you and your partner have single life insurance policies, these will pay out separately if you both 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 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 should cover the financial contributions both of you make to the family – you should also look to cover the cost of childcare if one of you dies and the other has to go back to work.

Joint cover only pays out after the first person dies. There’s no second payment if the other policyholder dies later. 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?

Life insurance is just one of many options. Other products that offer family protection include:

  • Family income benefit is designed to provide a monthly pay-out, instead of a lump sum. It acts as a replacement for your salary and covers 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 pays out if you’re diagnosed with an illness listed in your policy.
  • Death in service cover is offered by some employers as part of an employee benefits package. It pays a multiple of your salary as a lump sum to your beneficiaries if you die while on the payroll.

How much does life insurance for families cost?

The cost of your premium will depend on a number of factors, not least your age, general health, lifestyle (such as whether you smoke) 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. You’ll need to make your monthly payments to keep up your protection.

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.

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. 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 ask you a few more questions about your health to give you a more tailored quote.

Author image Anna McEntee

What our expert says...

“If you have children, life insurance is crucial. Especially when you consider that, according to Child Bereavement UK, one in 29 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.”

- Anna McEntee, Insurance comparison 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. You can increase your cover if your circumstances change – for example, if you have more kids 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, see if it can be split into single cover. The other option is to cancel the policy and 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 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.

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Page last reviewed on 02 FEBRUARY 2023
by Helen Phipps