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Family life insurance

Protecting your family’s future with life insurance

Rachel Ditchburn
Written by  Rachel Ditchburn
6 min read
Updated: 26 Feb 2024

During these uncertain times, there are life insurance policies that can help you financially protect your loved ones’, read on to find out how to help make their future more secure.

What is family life insurance?

Family life insurance doesn’t refer to a specific product. Any life insurance policy can serve as a way to help your loved ones once you're gone. This is why understanding the different types of policies is vital to cater to your family's needs. The payout from these policies can cover anything from mortgages and debts to daily living costs or specific responsibilities such as school fees. Essentially, it's a financial safety net that can alleviate the economic impact of a policyholder's death on their family.

family playing football

How does life insurance work?

Choosing the right life insurance policy involves several key decisions: the type of coverage, the term length, and the coverage amount. Upon the policyholder's death or diagnosis of a terminal illness, beneficiaries receive a payout, which can be used for various purposes:

  • Clearing outstanding debt, including car payments and credit card balances

  • Keeping up with mortgage payments

  • Providing childcare and ongoing financial support

  • Establishing an inheritance

  • Covering funeral expenses

The payout structure may remain constant or decrease over time, depending on the type of policy chosen. Some policies also allow for a payout upon the diagnosis of a terminal illness during the policy term.

Types of life insurance policies

There are various types of life insurance policies tailored for family protection. To help your understanding of what different types of policies offer and how much cover you need, refer to our guide on how much life insurance do I need? The different types include:

  • Whole of life insurance: A whole of life insurance policy covers you for life, giving you peace of mind that your family's financial needs are met, no matter when you pass away.

  • Decreasing term life insurance (mortgage cover): Tailored to match your mortgage balance, decreasing term life insurance ensures that your debts don't become a burden to your family.

  • Increasing term life insurance (index-linked): Coverage value increases over time to keep up with inflation and changing financial needs, and premiums also rise with the coverage value.

  • Family income benefit: Rather than a lump sum, this policy provides a regular monthly income to beneficiaries.

  • Level term life insurance: Offers a fixed coverage amount throughout the term of the policy.

Who needs family life insurance?

Family life insurance is beneficial for anyone who wishes to provide financial support to their loved ones after they're gone. It's particularly crucial for:

  • Young families and new parents who can secure lower premiums due to their age.

  • Single parents who are the sole financial providers for their children.

  • Homeowners who need to cover mortgage repayments and prevent passing on debt.

When it comes to choosing between a single or joint life insurance policy, a joint policy can be a cost-effective option for partners, providing a single payout that ends the policy. However, single-life insurance policies offer individual coverage and may be more suitable in the event of a separation, ensuring that individual beneficiaries receive a payout.

Determining coverage amount

The amount of coverage you need should reflect your personal and family circumstances. Consider factors such as:

  • Housing costs and mortgage repayments

  • Outstanding debts and loans

  • Day-to-day living expenses

  • Childcare and education costs, including the average funeral cost in the UK

Alternatives to family life insurance

While life insurance is a cornerstone of financial planning, there are alternatives that might suit your needs:

  • Family income benefit: Offers a steady stream of income instead of a lump sum.

  • Death in service: An employer benefit that provides a payout if an employee dies while employed.

  • Income protection insurance: Replaces a portion of your income if you're unable to work due to illness or injury.

  • Critical illness cover: As a standalone policy or an add-on, critical illness cover pays out upon the diagnosis of a specified serious illness.

Comparing life insurance policies

Finding the right life insurance policy at a competitive rate can be simplified with the help of MoneySuperMarket. Our platform allows you to compare different levels of cover and premiums, making it easier to find a policy that fits your budget and meets your family's needs.

Securing your family's financial future is a responsibility that comes with careful consideration and planning. With the right information and tools at your disposal, you can choose a life insurance policy that offers peace of mind and ensures your loved ones are cared for, no matter what the future holds.

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