Family Life Insurance: What Type of Policy Should I Choose?

Family Life Insurance

If you have a family of your own, you’ll know first-hand how important it is to ensure they are protected. Family life insurance can provide your family with financial support in the event of your death. In this article, we’ll help talk you through the types of cover you should consider.

What is Family Life Insurance?

Family life insurance usually refers to numerous life Insurance policies used to protect the people you hold dear. With life insurance, your family can have peace of mind, knowing they are free from financial worry if something were to happen to you.

Most family life insurance policies pay out a cash lump sum in the event of the policyholder’s death. Your family can use this money to manage finances such as living expenses, mortgage repayments or to cover your funeral costs.

Types of Life Insurance for Families

When it comes to protecting your family, there are two main types of life insurance offered by insurers – whole and term life insurance.

Whole Life Insurance

Whole life insurance provides permanent cover for you and your loved ones. Though it is the more expensive out of the two, your family is guaranteed a lump sum payout no matter when you die.

It has two levels of cover – balanced or maximum.

With balanced cover, both the value of your pay-out and the cost of premiums remain fixed throughout your cover. This means even as you get older and prone to health conditions, your cover will still cost the same as when it started.

Maximum cover works in which your cover is linked to an investment fund. Your insurer invests the money paid for premiums to make a return that covers the eventual pay-out.

If the investment performs well, you can receive bonuses that can provide your family with further financial support. However, if it fails your insurer can raise your premiums to cover the loss.

How to ensure sufficient life insurance coverage for your family

Term Llife Insurance

With term life insurance, cover only lasts for a certain amount of time, for example, 20 years. This is what’s known as the policy term. Your family will only receive a pay-out if you die within this time, otherwise, the policy expires.

There are 3 specific levels of term life cover:

  • Level term – Your policy pay-out and premiums remain the same during the policy term.
  • Increasing term – The policy pay-out increases overtime to protect the eventual amount from inflation. Your premiums may also be increased.
  • Decreasing term – Used to cover large payments like a mortgage. The pay-out amount decreases over time as you make repayments on your mortgage.

Term life policies are often cheaper than whole life. However, you may need to take out further cover if you survive the initial policy term.

Can I Get More Than One Policy?

With joint life insurance, you and your spouse are both covered under a single policy. Joint policies are considered cheaper and easier to manage than taking out individual policies.

Joint life insurance normally pays out after the first person in the couple dies or once both have passed away. This way your children have financial support regardless of which parent dies.

How Can Life Insurance Support My Family?

If you are the sole provider for your family, then they are most likely going to require financial protection in case you were to die. The payout from life insurance can help your family cover cost such as:

  • Living costs
  • Utility bills
  • Funeral expenses
  • Outstanding debts and loans
  • Childcare support

When buying cover it’s best to consider your families finances and how your death may impact them. It’s important that you take out the right amount of cover to avoid any unnecessary extra costs.

How Much is Life Insurance Cover?

Before you can take out a family life insurance policy, you’ll need to apply for a quote – this is an estimate of how much your premiums will be. Your insurer will ask some questions, usually regarding:

  • Your age
  • Current health
  • Occupation
  • The type of cover you want
  • How long you need cover for

To get cheap quotes for family life insurance, it’s best to apply at the earliest stage, when premiums are at their lowest.

If you’re ready to protect your family with life insurance, speak to your selected provider, today!