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- Family cover life insurance is a life insurance policy that will pay out to your family when you die.
- You can add your family members as beneficiaries to your life insurance policy.
- There are several types of family cover life insurance available, including: level term, decreasing term, and whole of life.
- Family cover life insurance is suitable for a wide range of family situations.
- You should consider whether a single or joint policy would work best for you and your partner.
What Is Family Cover Life Insurance?
Family cover life insurance isn’t necessarily a particular type of life insurance policy – it is a life insurance policy that you set up to pay out to your family when you die.
It’s up to your family how they use this money that they receive. Many families choose to use the funds to help with funeral costs, clear mortgages and debts, and cover everyday expenses. Some choose to put some of this money away for your children’s future expenses, such as a house deposit or university fees.
How Does Family Life Insurance Cover Work?
With Family cover life insurance, you are able to decide which type of life insurance you’d like, how long you want to be covered for, and the amount of the cover. You would then add your family members as beneficiaries.
With this cover, you’d pay the insurer a regular premium. If you were to die during the policy term, your family will receive the agreed payout amount. Some policies will also pay out if you’re diagnosed with a terminal illness and have a life expectancy of less than a year.
It’s important to remember that the payout amount can vary over time. This is dependent on the type of policy you choose.
What Types of Family Life Insurance Cover are Available?
There are several different types of life insurance that can help to protect your family. It’s really important to do your research and find the best insurance for you and your family. You can speak to our team of professionals to discuss your options and work out the best policy for you.
Level term life insurance pays out a lump sum to your family if you die during the cover term. This amount is chosen by you when you take out the policy.
With level term cover, the amount your family will receive stays the same throughout the term. However, if you die after the term has ended, your family won’t receive anything.
Decreasing term life insurance offers a payout amount that decreases as time passes. This type of life insurance policy could be useful if you just want to help your family pay off a mortgage if you die.
With a decreasing term policy, your family will only get a pay out if you die within the policy term.
Whole of Life
Whole of life insurance policies don’t have a fixed term. This kind of policy will pay out whenever you die. As a result, this is usually the most expensive option.
Whole of life policies may be treated differently in terms of tax than term policies. We’d always recommend seeking professional advice before taking out life insurance cover. Get in touch with our friendly team of experts today!
Who Needs Family Life Insurance Cover?
Family cover life insurance is suitable for a wide range of family situations:
- Young families – life insurance could help you feel more secure that your partner won’t be left with a financial burden if you die.
- Families with older children – a payout could help your family pay off debts and bills, or go towards your children’s future expenses.
- Single parents – the payout could be used to help your family support your children as they get older.
- New couples – you may be reliant on both your incomes to pay the bills, so it’s worth discussing your life insurance options with your partner.
- Homeowners – if your family would struggle to pay your mortgage or household bills without you, life insurance can help.
Should I Get a Single or Joint Life Insurance Policy?
If you’ve decided to take out life insurance and so has your partner, you can take out a joint life insurance policy. Getting a joint life insurance policy can be cheaper than separate policies. It’s really important to note that joint policies usually only have one payout, after the first person in the policy dies.
However, if you and your partner take out separate policies, they will pay out independently if you die during the term of the policy. You’ll both name your separate beneficiaries, and any that are listed on both yours and your partner’s policy will receive two payouts.
What Are the Alternatives to Family Life Insurance Cover?
Getting life insurance cover isn’t the only way to help protect your family after you die. There’s several options you can consider, including:
Family Income Benefit
Family income benefit pays out a monthly sum to your family rather than a one-off sum. This means that this money will act as a replacement for your wage. A family income benefit covers a set term, so will only pay out if you die within the term.
Death in Service Cover
Death in service is a type of insurance that is usually offered by your employer as part of your overall package.
The lump sum that will be paid to your beneficiaries is a multiple of your salary. This will only be paid if you die whilst you are employed by the company that provides the cover. If you leave the company, you can’t take the cover with you. This means that cover will end as soon as your employment with the company does.
Critical Illness Cover
Critical illness cover is sometimes offered as an add-on to your life cover, but it can be bought as a separate policy. This cover will pay out if you’re diagnosed with a specified illness. Each insurer lists different illnesses, so it’s really important to check through the policy before taking out cover with them.
Some critical illness policies also include cover for your children. With these policies, if your child were to become sick with a specified illness, you may be able to make a claim without impacting your main policy.
With critical illness cover, you pick the amount and the term that you’ll be covered for.
Income protection covers you if you can’t work due to illness, injury, or if you’ve been made redundant. With income protection, there isn’t a set list of qualifying illnesses.
Income protection is available as a long-term or a short-term policy.