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Family life insurance

Family life insurance isn't a specific type of insurance you can buy. Rather, it's a general term used to describe life insurance or any kind of insurance that provides a lump sum when you die.

Life insurance can only cover those over 18. So, even though you can't get a policy that covers every member of your family, there are still ways you can protect them.

The payout from a life insurance claim could:

  • Help keep your family out of debt after you die
  • Clear your mortgage if you die and allow your family to keep their home
  • Clear your mortgage if you die and allow your family to keep their home
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How does life insurance work?

Here's how it works:

  • You choose the type of life insurance policy you want, how long you want to be covered for and the amount of cover you want
  • You pay a set amount every month for as long as the policy is active
  • If you die during this time, your loved ones or beneficiaries get a payout worth the amount you agreed
  • If you live past the expiry time of your policy, there isn't a pay out

The amount paid out can vary depending on what type of life insurance policy you've chosen.

What are the different types of family life insurance?

  • Level term or term life insurance
  • Decreasing term or mortgage life insurance
  • Whole of life insurance, life assurance or end-of-life insurance
  • Level term or term life insurance pays out an agreed upon amount after you die. The amount of money paid out and how long the policy runs for is decided by you. According to our data, the average price for an annual level term policy is £28*.
  • Decreasing term or mortgage life insurance also pays out when you die. But the amount paid out decreases over time, which is designed to cover against a loan or mortgage.
  • Whole of life insurance, life assurance or end-of-life insurance is similar to level term except you're not limited by the length of your policy or your age. Your policy still pays out when you die and you still choose the amount of cover.
*Based on Confused.com data August 2023. Prices based on average quote offered on a policy with a 25-year term and £100,000 of cover.
Types of insurance Pros Cons Good for
Cover for life with a guaranteed pay-out
Usually a more expensive option
Ensuring you always leave something behind
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
Cheapest option
Pay-out decreases overtime
Covering a mortgage

How much cover does my family need?

Deciding how much to leave behind can be tricky. Here are a few things you should think about:

  • Your mortgage repayments. If you think your family would struggle to pay the mortgage after you die, think about leaving behind an amount that would cover this.
  • Your family’s expenses. Think about your family's needs such as paying the bills, food, education, general outgoings and travel.
  • The age of your children. If your children are still financially dependent on you, think about for how much longer. How much they need and for how long are important factors when deciding on the amount of cover.
  • Funeral costs. The average funeral costs over £4000 in the UK. Factor in this amount if you think your family would struggle to afford this.

Help with calculating your cover

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Compare family life insurance quotes

Who needs family life insurance?

Those who might need cover include:

  • Young families - You may want to think about leaving something behind to help with the financial burden of raising children if you die.
  • Families with older children - Parents with older children might want to consider the cost of future education such as university.
  • Single parents - If you're the sole parent, you might want to think about leaving enough for your children to help support them without you.
  • Homeowners - A mortgage life insurance payout means your family continues to keep a roof over their heads if the mortgage still needs paying.

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.

Can I leave my family life insurance payout to my children?

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

  • Children can't inherit from a will if they’re under 18. This means you'll have to nominate a trustee to keep your payout safe until your children turn 18 and can inherit the amount.
  • If you want your pay out to go to your whole family, you could nominate your partner as the inheritor. They could use the pay out to support themselves and your kids.
  • If you’re a single parent and would rather the payout went directly to your children, you need to make this clear in your will.

Another way to do this is to put your life insurance in trust. This ensures your payout is looked after by a nominated trustee if your kids are under 18. Or if you think that's too young, you can choose a specific age. It also means your pay out goes exactly to who you want it to.

Will my family pay tax on the money they receive?

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, is higher than £325,000, they pay 40% tax on anything above that threshold.

You can avoid this 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.

Your beneficiaries can also avoid paying inheritance tax if:

  • You leave your estate to your spouse, civil partner or a charity
  • Your estate amounts to less than £325,000, even after your payout.

You can find out more about inheritance tax on the GOV.UK website.

Level term life insurance

Is joint life insurance a good option for me?

Joint life insurance lets you cover 2 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.

There are downsides to a joint policy. It only pays out once, so if both of you died at the same time, your beneficiaries only get a single payout. If you 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.

What are the alternatives to life insurance?

If you want to look after your family financially, there are a few other options:

  • Critical illness cover can be added on to your life insurance or bought as stand alone cover. If you have critical illness protection and are diagnosed with an illness listed by your provider, you're covered.
  • Death in service cover is a type of insurance usually offered by your employer. It pays out a multiple of your salary in a lump sum to your nominated beneficiaries if you die while employed.
  • Income protection, also known as loss of earnings insurance, is a type of insurance designed to protect you if you fall ill or lose your job. According to our data, the annual average price for income protection is £40**.
**Based on Confused.com data June - August 2023. Prices based on average quote offered on a policy with a 25-year term and £100,000 of cover.

What do I need to get a life insurance quote for my family?

To get a quote, we 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

"Family life insurance isn't a real product but that doesn't mean you can't protect your family financially if you were to die.

Life or joint life insurance are great options to make sure your family can get financial help after you die. You just need to make sure you find the right policy for you and your family. Think about how much you want to leave behind for them and for how long they'll be dependent on your income."

Matthew Harwood, Home & lifestyle insurance expert at Confused.com
Home & lifestyle insurance expert Confused.com logo

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