Life insurance for your family

Having a child

Having children is a powerful incentive to protect those we care about most and can make us think about getting life insurance for our families. Since children are so dependent on their parents, it’s a natural feeling to want to help them get the best out of life even if you’re no longer around to be there with them.

There are term life policies that can leave your beneficiaries a large lump sum, which can help to pay for the general expenses of life.

This guide gives you an overview of what life insurance covers and how that can help protect your family's future.

As your children grow

Life can be an expensive business. The costs associated with living a fairly average life have increased greatly from a decade ago, in part due to inflation and in part due to a wider range of necessary expenses. TV, mobile, broadband and online subscription expenses are much more common, and house prices and the cost of living is generally higher.

The costs of looking after your children until they're old enough to look after themselves – be that 18, 21 or older – could be tens of thousands of pounds.

If you were unable to support your family, would they have the necessary means to continue life as they know it? Once all of the expenses have been factored in, it can become clear that a life insurance plan is a sound idea.

Level and increasing term policies are types of term cover that offer cash payouts in the event that the policy holder dies within their terms. The uses of a payout differ family-to-family, however the overarching idea is to prevent any further upheaval to the lives of those left behind. You might want them to use it to pay rent or school fees or leave it as a gift for them to invest or go on holiday. In any event, it's a way to make your loved ones' futures easier.

Level term

Level term cover offers a cash payout that maintains the same financial value throughout the term. Therefore, if the payout is £100,000 at the beginning of the policy, it will be £100,000 at the end. Due to the effect of inflation, it may be that this has less value in real terms, depending on the length of the policy.

Increasing term

Increasing term cover policies are designed to help offset the effects of inflation by increasing annually during the term of the cover. Due to the gradual increase in your payout, your premiums will annually increase as well.

Decreasing term

If you are paying a mortgage, then decreasing term life cover could be the most helpful. This type of policy often has the lowest premiums of the three most common term-life options (for the same amount of cover) and is designed specifically to cover gradual-repayment debts. The rate at which the payout amount on a decreasing term insurance goes down is designed to be broadly the same as how the outstanding balance of a capital and interest repayment mortgage decreases.

Therefore, should you die during the term of this policy, your mortgage obligations should not fall to your partner or children. Most providers have a cap on mortgage interest rates, meaning mortgages with interest rates over that cap may not be fully-covered by a payout.

As you get older

As we become older, our risk of serious illness increases. If you're thinking of taking out a life insurance policy to protect your family and want to cover against critical illness, you might consider taking out a critical illness benefit alongside your cover.

It’s hard enough thinking about what life would be like if you were diagnosed with a critical illness, let alone imagining your child falling seriously ill. Adding children’s cover to your policy for a little extra each month may help cover extra costs that could be incurred for things like medial expenses, taking time off to attend hospital appointments, arranging childcare or making adaptations to your home.

Different providers may offer a different range of cover. The children's cover amount available from Post Office, for example, ranges from £10,000 up to £30,000. It will be paid if, whilst covered under the policy, the insured child dies as a result of an accident or suffers from an illness/injury as specified that meets our definition.

When your kids have kids

Approaching the latter half of your life can make you consider what insurance your family might need to help pay for things like your funeral, or your outstanding debts if you were no longer around to pay them.

Over 50s life cover might be an important part of a family life insurance plan. It differs from term life policies in that it is cover that lasts for the rest of your life, regardless of how long that is. The payouts for over-50s policies tend to be significantly lower than for term life policies, and are not designed to cover large repayments such as mortgages. Rather, they can help contribute towards the cost of your funeral, settle credit card bills or act as a gift to your family. There are fewer qualifying factors to over-50s policies – with the Post Office, you simply need to be a UK resident aged 50 to 80 to qualify.