Life is all about stages, but nobody knows exactly when they are going to die. It’s never easy to imagine what might happen to your loved ones if you were to die. that’s why it’s always best to plan ahead. Family life insurance can help to protect your families future, for when you’re no longer there to look after them.
What is family life insurance?
Whether you’re just started a family or planning to start one, you’ll want to ensure they have access to financial support. Family life insurance is a term used to refer to a mixture of different life insurance policies. Picking the right insurance for you and your family can be no easy feat, so this guide is here to help ease you through the process.
Family life insurance: How it works
When applying for life insurance, you have to decide what type of life insurance (We’ll get to those in a second!) you need, the length of time you wish to be covered for. You then add your family members to the policy.
Once everything is signed and sealed you’ll begin paying your monthly insurance premiums (As discussed with your insurance provider or broker). Should you die within the agreed policy term, your family will receive a lump-sum payout. Some insurance providers will have different terms to their policies compared to others, so it’s important to check every avenue to make sure you’re fully covered.
Like most types of life insurance, you will be required to answer questions about your health and lifestyle and any pre-existing conditions you may have.
The types of life insurance for families
There are 3 main types of life insurance cover to choose from, each coming with induvial benefits that can help your family.
Whole life insurance
Whole life insurance (Or ‘whole of life’) ensures that you are covered right up until your death as it has no fixed term in the policy. It is often the more expensive option for life insurance, however, there is the added reassurance that your family is covered no matter when you die – just as long as you keep paying your premiums.
Level life insurance
With level term life insurance, you are covered so long as you die within the agreed policy term (Known as a ‘fixed term’). When you die, your family will receive a cash lump sum to help them with their current/future finances.
Increasing term life insurance
Increasing term life insurance is designed to protect the eventual pay-out from the rise of inflation. The pay-out increases by 3% each year until you die, so that your family don’t lose out.
Decreasing term life insurance
This is normally the cheapest option for life insurance. As the name suggests, decreasing life insurance means that the policy pay-out reduces over time. So if you died 5 years into the policy the payout would be much larger than if you died 25 years into it. This type of policy is usually taken out to cover mortgages.
Do you need family life insurance?
It really depends on your situation if you are single with no kids, you wouldn’t be looking into family life insurance – though there are still plenty of other options. The types of people who would life insurance for their family are:
Parents with young and older children
Whether you’ve recently had kids are they have grown up, you’re always going to want them to be protected for the future. Life insurance can help provide living costs for your children, or provide help with debts like student loans if they go off to university. With older children, you may want to help them with funeral costs.
Single parents
If you are the sole carer for your children, you’ll want to be covered so that if you die during the cover term, the money can be used to help others support your child.
New couples
If you and your partner share each others income, you might want to look into a single or joint life policy. With a joint life policy, you’ll both be covered if either of you dies. However, the policy only covers one pay-out.
Homeowners
Life insurance can help with mortgages repayments and other household bills that may be left outstanding when you die.
Alternatives to family life insurance
There is a range of other life insurance types that offer financial support for your family, not just those previously mentioned. Some of the alternatives include:
Family income benefit
Instead of paying out one lump sum, family income benefit pays out monthly sums to your family, acting as cover for the loss of your monthly wages.
Death in service benefit
This can be offered by employers as part of your contract and benefits. If you die whilst working for a company they will pay out a lump sum (multiplied from your salary) to your loved ones. The downside is that if you leave the company you’ll lose cover.
Critical illness cover
This Can either be a single policy or as an add-on to other types of life insurance. Critical illness cover pays out if you are ever diagnosed with an illness, depending on the type of illness and if it’s covered in your plan. Some policies will allow coverage for your children too.
Income protection
Income protection covers you if you can’t work because of an illness, injury or redundancy. It can be bought as both a short-term and long-term policy.
Get a quote for life insurance
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