When it comes to starting a family, it’s always best to keep one eye on the future ahead. Family life insurance offers financial protection to your loved ones if you die, supporting them during this difficult time. But before you purchase cover, you need to know what options are available to you.
What is Family Life Insurance?
Family life insurance is not a specific type of policy but refers to any type of cover used to protect your family. With most types of life insurance, your insurer pays out a lump sum amount to your loved ones when you die.
Who needs Family Life Insurance?
A family life insurance policy is best suited for:
- Families – Whether you have a young family or older, life insurance can protect your loved ones from any financial burdens left on them. The pay-out can help with child support as well as future expenses like university costs.
- Single parents – If you were to die, the payout can be used to provide support for your children’s future.
- Couples – If you and your partner share an income or mortgage, you may need cover. With life insurance, you can leave your partner with enough to clear the outstanding balance if you die before it has been paid off.
Types of Family Life Insurance
There are two main types of life insurance best suited for families – whole and term life insurance. These policies have several differences in terms of cover length and cost, so how do they work?
Whole Life Insurance
Known to insurers as ‘life assurance’, whole life insurance provides coverage throughout the insured’s lifetime. This policy pays out a lump sum no matter when the policyholder dies, however, premiums tend to be more expensive than term life insurance.
The main benefit of whole life cover is that your family is guaranteed a pay-out when you die – so long as you keep paying for premiums.
There are two main types of whole life insurance cover – balanced (also known as standard) and maximum cover.
With balanced cover, your monthly premiums and pay-out value are fixed throughout the policy length. This is especially beneficial as even when you get older or develop health conditions, your policy will still cost the same as before.
The maximum cover works much differently, in which your policy is linked to an investment fund. Each month your insurer invests the money from your premiums to fund the eventual pay-out amount.
This type of cover can be risky as if the investment fails, your insurance provider can raise your premiums to cover the cost.
Term Life Insurance
Although typically cheaper than whole life cover, term life insurance doesn’t provide permanent cover. Instead, your policy lasts for a set period, e.g 20 years or so. Your policy only pays out if you die within this time, if not your policy simply expires.
Term life cover has 3 levels of cover:
- Level term – Your policy premiums and pay-out value are fixed throughout your cover term. This prevents your premiums from being raised as you get older or develop health conditions.
- Increasing term – The payout amount increases over time to protect the eventual value from inflation. Because of this, your premiums also increase as well.
- Decreasing term – Usually taken out alongside large payments like a mortgage. As you make repayments on your mortgage, the payout value of your policy decreases. This way if you die before it has been paid off, your family can use the payout to cover the cost.
Joint Life Insurance
If you and your partner share an income, you might want to consider getting joint life insurance. A joint policy protects two people under a single policy. Popular with couples, these policies can often work out cheaper and easier to manage than individual policies.
How much cover do I need?
Nobody wants their family to struggle when they die, making life cover is a great way of providing peace of mind. Life insurance can be used to help your family with future costs such as:
- Living expenses
- Household bills
- Funeral costs
- Mortgage repayments
- Debts/loans
Before you apply for cover, it’s best to assess the financial situation of your family if you were to die. That way you can choose the right amount of cover, instead of having too much or too little than your family needs.
How much is Life Insurance?
Several factors can affect the cost of your premiums for life insurance. These are things such as age or if you have pre-existing health conditions or being a smoker. When you apply for life insurance, your provider will ask you a few questions regarding:
- Your age
- Health
- Occupation
- The type of policy you want
- The amount of cover you need
To get the cheapest life insurance premiums it’s best to take out cover when you are younger, at your healthiest. That being said, even as you get older there are other forms of life cover such as over 50s life insurance.
If you are ready to protect your loved ones with family life insurance, head online to get a quote today!
Ayesha completed her Doctor of Philosophy in Biochemistry and started her career as a College Lecturer in 2013. Today, she’s a happy mom of 2 Kids in the field of digital marketing. She loves reading books, spending time with her family, and making delicious food for her husband.
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