Family life insurance

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

This could be used to cover funeral costs, or simply to make life financially easier at a very difficult time. Claiming for a child won’t affect the rest of your policy either, so you’ll still have life cover if you do need to make a claim and will still get the same pay-out if you were to pass away.

While there’s a minimum age you’ll need to be to take out a policy, there’s usually no upper age limit. Standard life insurance policies will 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 will offer you guaranteed cover up until age 84 and will 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’ll be able to 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.

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

When you die during the term of your life insurance, the pay-out forms part of your estate. This is the sum total of everything you leave behind.

If your estate amounts to less than £325,000, you pay no tax on it. But if your estate, including your pay-out, exceeds £325,000, you’ll pay 40% tax on anything above that threshold.

This can be easily avoided by putting life insurance in trust. Doing this will separate your pay-out from your estate so your beneficiaries get the full amount tax-free, 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 pay-out 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 pay-out quicker. With a will, your pay-out may have to go through probate, which can take a long time. With a trust, it normally doesn’t.

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 passed away.

This isn’t the case with individual life insurance, where only one of you is covered. This can cause issues if the uninsured partner passes away, leaving the surviving partner and any kids they had with only a single income, and no pay-out 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 would only get a single pay-out. If you each had individual life insurance policies, they’d get two pay-outs. This would cost you more, however, so whether you want to pay that depends on whether you think your family needs that extra level of support.