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Family life insurance

Find family life insurance that’ll protect your loved ones

  • Choose from 3 levels of life insurance for your family

  • Get a quote in just 3 minutes

  • Compare deals from trusted insurers

What is family life insurance?

Family life insurance is a life insurance policy that's designed to benefit your family if you die. It's not a specific type of policy - rather, it's a term used to show that any payout is there to help your family.

This could be simply to cover your unsettled debts after you die, or to provide a nest egg for your loved ones.

How can life insurance protect my family?

If you’re looking for a way to ensure your family wouldn’t struggle financially without you, then life insurance can help.

The payout from a life insurance claim could:

  • Help keep your family afloat after you die
  • Clear your mortgage if you die and allow your family to keep their home
  • Act as an inheritance, setting up your children for life

What type of life insurance is best for my family?

There are 3 main levels of life insurance to choose from, and each could help your family in different ways.

  • Whole life insurance. Whether it's 5 years from now or 55, your loved ones still get a payout. It pays out the same amount no matter when you die and if you keep paying for the insurance, your cover continues. Some policies even let you stop monthly payments after a certain number of years, so you still have cover without any further costs. Whole life insurance is only available for those aged 50-80.
  • Level term life insurance also pays out the same amount no matter when you die. It differs from whole life insurance because you choose a cover period, say 25 years. If you die during that time, your loved ones get the amount you’re insured for. Inflation can be an issue with level term insurance as it means your payout may be worth less in 30 years than it would be today.
  • Decreasing term life insurance pays out less the further into the policy you get. Most people get this to cover their mortgage, which also decreases over time. If you bought £100,000 of cover and died 5 years in, you might get £90,000 as a payout. Die in year 25 of that same policy and you may get £10,000. It’s usually cheaper than other types of life insurance for this reason.
Types of insurance Pros Cons Good for
Whole
Cover for life with a guaranteed pay-out
Usually a more expensive option
Ensuring you always leave something behind
Level
Same pay-out for the whole cover period
Typically costs more than decreasing term life insurance
Covering everything you need to, for a set period
Decreasing
Cheapest option
Pay-out decreases overtime
Covering a mortgage

How much family life insurance do we need?

When buying life insurance for you and your family, you need to decide how much you want your payout to be.

This can be tricky, but there are a few ways to settle on the right figure.

You should think about:

  • Your mortgage repayments and how much is left to pay. If you died in the next few years, could your partner keep up with the repayments? If not, then leaving enough behind to clear your remaining balance could help your family keep your home.
  • Your family’s expenses and how much they'd need to live comfortably. Think about general outgoings like food, travel, bills and any other expenses like education.
  • The age of your children and if your children are still financially dependent on you. It’s worth thinking about how long this will be the case. Think about how much they’d need, and for how long, and tie your family life insurance cover amount to this.
  • Funeral costs are also worth considering. The average UK funeral costs over £4,0001, could your family afford to cover your funeral?

1According to Moneyhelper, the average total cost for a funeral is £4,383

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Who can I cover on a family life insurance policy?

Most policies will only let you cover those over age 18. But some offer limited cover for your kids too. If they do, you’re given a set amount you can claim for if, tragically, one of your children dies.

This could be used to cover funeral costs, or simply to make life financially easier at a difficult time. Claiming for a child shouldn't affect the rest of your policy either. So you still have life cover if you do need to make a claim and still get the same payout if you were to die.

While there’s a minimum age you need to be to get a policy, there’s usually no upper age limit. Standard life insurance policies also usually cover you up to any age, although you may get a better deal with a dedicated over-50s policy. Over 50 life insurance policies offer you guaranteed cover up until age 84 and normally cover you beyond that if you answer a few medical questions.

For joint policies, as long as you live at the same address, and are both over 18, you can share cover. You don’t need to be married, or even in a relationship. You could even cover yourself and a child, as long as you’re both over the minimum age.

Can I leave my family life insurance pay-out to my children?

Yes, but there are a few things to consider before you do:

  • Children cannot inherit from a will if they’re under 18, so you have to nominate a trustee to look after your payout until your children come of age. Once they do, the money can then be transferred to them.
  • If you want your payout to go to your family as a whole, you could nominate your partner as the inheritor. They could use the payout to support themselves and your kids.
  • If you’re a single parent or would rather the money went directly to your children, you’d need to make this clear in your will.

Another way to do this is to write your life insurance in trust, and it ensures that your payout goes to exactly who you want it to. If your kids are under 18, you need to nominate a trustee to oversee the money until they come of age.

With a trust, you can specify when your children get the money. If you think 18 is a little young to be getting a large payout, for example, you could ensure that they couldn’t access the money until age 25.

Will my family pay tax on the money they receive?

This depends on whether you write your life insurance into a trust.

If you die during the term of your life insurance, the payout forms part of your estate. Your estate is the sum total of everything you leave behind.

If your estate amounts to less than £325,000, your inheritors pay no tax on it. But if your estate, including your payout, exceeds £325,000, they pay 40% tax on anything above that threshold.

This can be avoided by putting life insurance in trust. Doing this separates your payout from your estate so your beneficiaries get the full amount tax-free. This is even if your estate is over the £325,000 UK inheritance tax threshold.

You’d be wise to do this if your mortgage is more than £325,000. If your payout is over the threshold, the tax you’d have to pay on it may mean it’s no longer enough to cover your mortgage. Putting your policy into a trust is a smart way to ensure it is.

Trusts also usually allow your beneficiaries to get their payout quicker. With a will, your payout may have to go through probate, which can take a long time. With a trust, it normally doesn’t.

Level term life insurance

What about critical illness cover for families?

You can add critical illness cover to a life insurance policy, usually for an extra cost. It covers you for serious illness or injury and if you make a successful claim you get a payout. You can use this however you like, but it’s a particularly good way to support yourself during your recovery or to fund changes to your home if you’re left with a disability.

Families can benefit from it too, as it ensures that if one household earner is unable to work, their income can be replaced with a payout. With statutory sick pay in the UK currently at £99.35 a week, this can be a handy way to ensure your family maintains its standard of living with a reduced income.

Some life insurance policies also let you cover your kids, so you can claim for a set amount if they become seriously ill or suffer an injury. This payout could then be used to support them or pay for private healthcare to help speed up their recovery.

Should we think about joint life insurance?

Joint life insurance lets you cover two lives at once, so it’s particularly well suited to families.

With both you and your partner insured, you’d know that your kids would be looked after financially if either of you died.

This isn’t the case with individual life insurance, where only 1 of you is covered. This can cause issues if the uninsured partner passes away. This leaves the surviving partner and any kids they had with only a single income, and no payout to make up that loss.

There are downsides though. Joint policies only pay out once, so if both of you died at the same time, your beneficiaries only get a single payout. If you each had individual life insurance policies, they’d get 2 payouts. This costs more, however, so whether you want to pay that depends on whether you think your family needs that extra level of support.

How do I get a family life insurance quote?

Getting a life insurance quote is easy. We’ll ask you for a few details, and then compare deals to find the one that best suits your family’s needs.

We’ll need to know:

  • Your name and age
  • Whether you want joint or single life insurance
  • How much cover you want, and for how long
  • Whether you have any pre-existing medical conditions
  • About your lifestyle, like whether you smoke

Having these to hand before getting a quote can speed up the process and help find you a deal faster.

Compare family life insurance quotes

What our life insurance expert says

Life insurance is about making sure your family is cared for if you pass away. So finding the right policy is crucial. Think about what you want covered before you dive in, whether that’s just your mortgage or something a bit more. We’ll do the rest to help you find the right policy for you.

expert comment signature Louise Thomas personal finance

Louise Thomas

Life insurance expert

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