Family life insurance
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Taking our some form of family life insurance can help provide great peace of mind that your loved ones will be taken care of financially when you die.
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What is family life insurance?
Nothing in life is more precious to us than our loved ones, and it is natural that we want to protect them and provide for them.
Despite the traditionally accepted family unit of ‘2.4 children’ having changed to reflect more modern times and social themes in recent years, the cost of having and raising a family is still expensive.
Having more mouths to feed, more clothes to buy and then as they grow up, all the materialistic trappings of 21st century Britain, families are a constant drain on our monetary resource. That’s a long-standing, generation-spanning given!
But what if you were no longer around to provide for your family? Who would be responsible for feeding and clothing your children? Who would be liable to continue paying the mortgage? What exactly would happen in the event of your death, if your dependants couldn’t rely on your income? Family life insurance could well be the solution.
It’s not one defining policy as such, more a pick n mix of an assortment of life insurance plans, all or some of which would be of huge benefit to you and your family from the outset.
Deciding on the type and level of life insurance you take out with your family very much in mind will largely depend on individual circumstances. These will normally include factors such as combined household income, monthly expenditure and number of dependents so no one policy is the same or for that matter set in stone.
Family-based life insurance policies when they do pay-out typically offer a tax free lump sum upon death, with this payment unrestricted in terms of what it can be spent on or put towards by the pre-determined beneficiaries.
Usually this will be meeting an array of outstanding expenses such as mortgage repayments, personal loans/other debts with banks and loan providers or university fees. As a general guide family life insurance providers recommend that policy pay-outs should ideally set aside a sum on average of £150,000 for each acknowledged dependent.
The breakdown of specific policies which could comprise a combined family life insurance package are more often than not any from the following list: Income Protection Cover, Real Life Cover, Level Term Cover, Critical Illness Cover and Mortgage Insurance.
Running the rule over the first option, income protection cover, and this policy would be of particular interest to those families with just the one source of regular income, as well as others who have monthly utility bills and loan repayments to honour from the single income stream. Stay at home parents would also benefit from income protection cover who might require it for on-going childcare costs if they became ill. Supported by a tax-free monthly income until such time as you make a full recovery from a serious injury or illness, this policy can (in certain situations) pay-out up until retirement age if certain criteria are met by the policyholder. In addition to this, redundancy cover could be added to an income protection plan to increase the potential monthly amount received in such an eventuality.
Real life cover is perhaps the best family life insurance policy package, in as much as it envelopes a triumvirate of very important covers, namely life insurance, income protection and cover for a trio of the most common illnesses; cancer, heart attack and stroke.
This blend of individual plans melded together under the protective umbrella of real life insurance cover also equates to lower annual/monthly premiums when contrasted with arranging the three named policies as separate entities.
Level term cover provides for your dependants with a fixed pay-out when you die, with the precise term and duration of the cover being established by you from the outset of the policy.
Critical illness cover will come up trumps if and when the policyholder is diagnosed with one of the serious illnesses cited in the terms and conditions of their policy documentation.
Most of these type of family-orientated insurance plans also extend to cover children. Among the life-altering medical conditions and long-term health implications found within the qualifying parameters of this cover are Alzheimer’s, MS, major organ transplants, kidney failure, blindness, deafness and 17 other serious illnesses highlighted by the Association of British Insurers to be taken into account my critical illness cover insurance providers.
Meanwhile, mortgage insurance is an option taken up by many people creating a dedicated family life insurance policy bundle, which as the name suggests brings security to your surviving family in the event of the policyholder’s death, with direct regards to settling outstanding mortgage repayments on a family property.
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Do I need family life insurance?
We would say so, on account of the peace of mind it affords you and your family courtesy of the monetary safety net it ultimately provides.
One of the main bonuses of arranging a family life insurance policy of some kind is that for the most part its value will remain constant and not subject to change, unlike savings, shares, retirement funds and any other investments you might also have.
While the aforementioned can be affected by fluctuations in the economy – interest rate shifts in particular – your family life insurance policy won’t suffer the same uncertain fiscal future.
That being said, the buying power of the eventual cash lump sum will be affected by changes to inflation in the unforeseen future.
The question as to whether or not YOU need family life insurance pretty much depends on your current situation.
If you’re single with no partner or children, then a family life insurance policy would not be recommended.
The same applies if your family have long since flown the nest, or any other situation whereby your one-time dependants aren’t actually solely reliant on you any longer.
Conversely, if you’re in an established relationship/married/have a civil partner and/or have children still dependant on you financially, then yes, a family life insurance makes absolute sense from our perspective.
How much does family life insurance cost?
This varies extensively depending on many factors individual to the family in question.
Joint incomes, expenditure (mortgage repayments, utility bills, loans, etc.), age, health and career type all play their part in determining just how much a policyholder/policyholders might expect to pay on a monthly/annual basis for their family life insurance plan.
And as we’ve mentioned above, it’s difficult to suggest even a ballpark figure given that people generally tend to mix and match a selection of separate life insurance-related policies and covers to create a single package.
To help get you started, you can use our life insurance calculator to get an idea about how much your premiums may cost.
What can I do to reduce the cost of family life insurance?
According to people in the know at some of the UK’s leading family life insurance providers, there are three key qualifying criteria which can either assist you in finding competitively priced polices, or go against you in terms of keeping those premiums to a manageable figure.
They are: the potential policyholder’s age, weight and smoking status. Admittedly little can be done about the first influencing factor, yet much can be done to address the remaining two if you fall short of the insurance provider’s expectations at these hurdles to cheap premiums.
Adopting healthy lifestyle choices are fundamental values to ensuring more affordable life insurance policies across the board to be perfectly honest, and it’s never too late to look to improve your general health and wellbeing.
Smoking is viewed as a complete no-no (and results in higher premiums) for the simple reason that smokers are statistically/medically proven to be more prone to serious health problems in later life, which puts them in a far higher risk category from the outset of insurance talks. More risk will always equal higher premiums. Fact.
Elsewhere and opting for term life insurance ahead of whole of life insurance will save you more than a token few bob too, with policyholders electing to take out a term life insurance package over a period of 5 – 40 years said to make significant savings in monthly premium outlay compared to those who choose the whole of life alternative plan.