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Life insurance for new parents

Collette Shackleton
Written by  Collette Shackleton
Alicia Hempsted
Reviewed by  Alicia Hempsted
5 min read
Updated: 30 Apr 2024

When you start a family, it's the perfect time to think about the future. Discover everything you need to know about life insurance and how it can help protect your loved ones in this guide.

Becoming a parent for the first time is an amazing milestone for you and your partner. It's no surprise that having a baby is a common time for parents to look into life insurance.

Protecting your growing family and providing financial security becomes top priority, but which option is best for your circumstances? Keep reading to find out all you need to know about life insurance for new parents.

Why is life insurance important for new parents?

Life insurance isn't the nicest topic to discuss, especially when you've just had a baby. No parent wants to even think about their children growing up without them being there for them.

But the sad reality is that approximately 127 dependent children lose a parent every day according to the Childhood Bereavement Network.

It's not just children that are affected when they lose a parent. Each parent plays a key role in the household, and they rely heavily on each other, both emotionally and financially.

If one parent dies, the other may have to leave a full-time job and reduce their income to care for their children. Or if they decide to carry on working, they may struggle to pay for extra childcare.

Life insurance provides a financial security blanket for many surviving parents, and it gives you peace of mind that your family will be ok, should you pass away.

What type of life insurance policy should new parents get?

If you're looking at life insurance for parents, there are two main types of life insurance policies to consider:

Level term life insurance

Level term life insurance is a fixed policy where the coverage and benefits stay the same throughout a set period of time, called a policy term.

You choose a lump sum payment amount and policy term length, and your family will get the same payout, regardless of when you die during this time.

This is a good choice for families who want to know the exact amount their loved ones will receive if they pass away, but the cover stops once your policy term ends. So bear in mind that your family won't receive a payout if you die after the term has ended.

Decreasing term life insurance

Decreasing term life insurance is a cheaper option to other types of life insurance because the payout amount and value of the policy decrease over time.

If you died at the beginning of your policy, the payout amount your family received would be higher than if you were to die towards the end of the policy term.

This type of insurance is typically used to cover bigger debts that may be passed onto your loved ones, such as a mortgage repayment, as this will also go down over time.

The only negative is that your family may not receive as much and might require further financial support.

You can take out both of these types of life insurance as joint policies.

What factors affect the cost of life insurance for new parents?

The cost of your life insurance policy as a new parent will vary, depending on the following factors:

  • The type of coverage you require

  • Your age

  • Health and lifestyle choices e.g. if you smoke or drink alcohol

  • If you have any pre-existing medical conditions

  • Any additional cover options you choose, such as critical illness cover

When is the best time to purchase life insurance as a new parent?

If you're looking at taking out life insurance, it's best to invest in a policy sooner rather than later while you're younger and generally healthier, as you're seen as less of a risk to insurers.

It's even wiser to look into life insurance while you're pregnant, so it's one less thing to worry about once you've given birth. You can always adjust and update your existing policy later to suit the needs of your growing family.

How much life insurance cover do I need as a new parent?

As with all types of insurance, there is no definitive answer as to how much cover you need. It's something you'll need to sit down and figure out in terms of how much your outgoings are now and what they could be in the future.

Raising a child up to the age of 18 can cost over £160,000 for couples and £220,000 for single parents, according to Child Poverty Action Group. And that's without factoring in your own household bills and expenses on top of this.

Some things to think about before you commit to a life insurance policy include:

  • Your mortgage or rental payments: or similar large outstanding debts that could be a financial burden if the main household earner died

  • Monthly outgoings: including the cost of running your home, a car if you own one, plus any regular expenses such as grocery bills and mobile phone contracts

  • Loss of earnings: factor in what financial support the bereaved partner would need if they had to give up work to care for children

  • Childcare costs: such as nursery or childminder fees

  • Education costs: even if your child won't go to independent school, there are still costs to consider such as school uniforms, books, extra curricular activities, any school trips, etc. Plus college and university costs later down the line

  • General child expenses: including clothes, toys, activities, birthdays, Christmas, any holidays, etc

It's typically recommended that your life insurance pay-out should be at least 10 times your annual salary. If you would prefer to leave this to your child to access when they're older, you can also look into setting up your life insurance in trust.

What happens if I don't have life insurance as a new parent?

Life insurance provides crucial cover for your family if you pass away and gives you reassurance that your loved ones will be financially protected after you're gone.

While it might not be top of your list once your baby is born, you could be leaving your family to struggle without your household contribution if you don't have life insurance.

Are there any exclusions or limitations in life insurance policies that new parents need to be aware of?

Most insurers are happy to provide standard life insurance for new parents. However, if you have any serious health issues or had pregnancy-related complications, you may need to look for life insurance to cover pre-existing medical conditions.

While most providers will still offer you a policy if you have a pre-existing condition, they may exclude death-related to that condition from. A specialised policy will ensure you'll be covered in these circumstances, however this will most likely cost more than a standard policy. This is because you're considered more of a risk to insurers, and less insurers offer this type of cover so it will be more difficult to obtain.

Don't forget to provide a trustee

Insurers cannot pay out a life insurance benefit directly to children under the age of 18, so parents will need to decide on a person to manage their life insurance pay out when they apply for a policy. This is something that especially single parents need to think about if they don't have a partner to accept the payout of their life insurance.

When you apply for life insurance, you'll have the option to put your life insurance in a trust, which ensures your life insurance doesn't go through probate. A named trustee will then be responsible for managing your life insurance payout and using it in accordance with your wishes.

If you don't have a trust, the payout will usually go to the executor if you have a will or your next of kin if you don't.

How can I make sure my life insurance policy covers my family's needs in the future?

The best way to ensure your life insurance policy is still suitable for your needs is to review your policy regularly. This could be on an annual basis, but also once a big life event has taken place, such as:

  • Moving home

  • Paying off your mortgage or remortgaging your house

  • Having another baby

  • Getting married if you aren't already

  • Changes to your salary - e.g. a pay-rise or career break

  • Divorce or separation

You can also look at adding to your policy or maybe taking out another type of life insurance, depending on your circumstances.

Are there any other types of insurance I might need as a new parent?

In addition to life insurance, there are other types of financial protection that you might want to look into as a new family:

  • Critical illness cover: if you become seriously ill or injured then you'll receive a one-off payment

  • Income protection insurance: this replaces your income if you're sick and unable to work and may also cover certain periods of unemployment if you're made redundant for example

  • Family health insurance: covers the cost of private medical treatment, meaning shorter waiting times

How can I compare and choose the right life insurance policy for me?

Getting a life insurance quote as new parents is quick and stress-free with MoneySuperMarket. Compare quotes from leading UK providers, and choose the best option to suit your personal circumstances. As with any insurance quote, you can access the terms and assess any exclusions before committing to a policy.

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