Search
Taking out family life insurance can be daunting for many people, as it’s an insurance often against the unthinkable. Sadly, the unthinkable can happen and it’s important to know that with life insurance, your loved ones will be looked after with a financial safety net to ensure that:
Mortgage/rent costs, bills, childcare, debts etc. could all be paid for.
The quality of life that they're used to can be maintained (or even enhanced).
Unnecessary stress and worry is avoided at a difficult time.
As with many insurance products, there’s lots of terms that risk sounding like jargon. So at Cavendish Online, we’ve put together a brief guide to explain what family life insurance is, to help you make a more informed decision on whether it’s right for you.
Family life insurance is a type of life insurance designed to provide financial protection for your family if you were to die. It ensures that your dependents—such as children, a partner, or other family members—are supported financially, helping them cover everyday costs, bills, debts, and other essential expenses.
There are two main types of family life insurance:
Family life insurance can be taken out individually or as a joint policy for couples.
Family life insurance is suitable for many types of families, including:
Families with young children often have childcare costs, school fees, and day-to-day expenses that depend on both parents. Having cover in place can protect your children’s needs if a parent dies unexpectedly.
For families with older children, a policy could help cover ongoing expenses such as university fee, hobbies and household costs.
If you are the sole provider, your policy could be used to protect your children’s future, covering essential expenses and giving peace of mind that they’ll be financially secure.
Life insurance can protect your family’s home by ensuring that the mortgage is paid off or manageable if the main earner dies. This could prevent your family from losing their home during a difficult time.
Joint life insurance or individual policies can cover both partners, potentially protecting bills, debts, and mortgages if one person dies.
Family income benefit provides a regular tax-free income to your family in the event of your death. Essentially, it acts to replace your income to protect the finances of your loved ones if you were to die within the period of the policy.
Unlike term insurance (which pays out a lump sum), family income benefit pays out incrementally, as if you were earning a monthly wage for a set amount of time.
If you’re interested in taking out a family income benefit policy, we’ll need to know how much income you’d like your family to receive (and for how long) so we can calculate the cost of the cover.
Example of family income benefit:
Term life insurance comes in two types and can be taken out either as an individual plan or a joint policy:
Level term life insurance pays out an agreed sum if you die during the policy’s lifecycle. If you outlive the term, you can simply set up a new policy based on your new circumstances.
This type of cover offers your family protection by covering flat costs, such as the loss of your income.
Example of level term life insurance:
Insurance for the value of £150,000 is taken out
The term is fixed for 20 years
If you die during the 20 years and make a valid claim, the payout of £150,000 is made
If you die after the 20 years, your insurance will have ended and there will be no payment.
Decreasing term life insurance pays out a sum which decreases over the lifecycle of the policy. Premiums on this type of policy are typically less expensive than they are on a level term policy.
If your family would need to cover a mortgage or other debt which is paid off over time, this option could be the most cost effective and helpful way to do it.
Example of decreasing term life insurance:
A policy is taken to cover the cost of a repayment mortgage at £250,000.
After monthly repayments, the total owed on the mortgage after the first year is £234,000.
The insurance on the policy decreases roughly in line with the mortgage and so has also reduced.
If you were to die during the policy length, depending on how long you have had the policy - a final settlement figure would be paid.
The final settlement figure would reflect that the amount of insurance had decreased over time.
Whole life insurance provides cover for your entire life, paying out a lump sum whenever you die, as long as premiums are kept up to date. Unlike term policies, which only pay out if you die within a set period, it ensures your family is guaranteed a payout.
This type of cover is often chosen for long-term financial planning, leaving an inheritance, or helping with potential Inheritance Tax liabilities. Because the cover is guaranteed for life, premiums are usually higher than term policies.
Example of whole life insurance:
Policy value: £100,000
Term: Whole of life (no expiry)
If you pass away at any point while premiums are being paid, your family receives £100,000.
Whole life insurance can be taken out individually or as a joint policy for couples. One benefit is that it can provide peace of mind that your family will be financially protected, regardless of when the claim is made.
Many couples also may wish to consider joint life insurance, which is usually both better value and simpler to manage.
Joint life insurance comes in two formats:
It is also possible to obtain either term insurance or whole life insurance, depending on what works for you.
Example of term first death joint life insurance: | Example of term second death joint life insurance: |
|
|
Example of whole of life first death joint life insurance: | Example of whole of life second death joint life insurance: |
|
|
There’s no right or wrong type of cover for your family. Cover should be chosen based on understanding the options available and making an informed choice for your family and circumstances, both now and how they may likely be in the future.
The payout from a life insurance policy could help to cover some or all of your financial obligations if you were to suddenly die. For example, a two-parent family with 2 children might have a combined annual income of £35,000 and monthly outgoings of £2,000.
If one parent took out a policy and passed away, their family could receive a payout up to an agreed limit that could cover the household finances over a period of time.
The amount you want to secure and the premiums you’re willing to pay are up to you (and can be surprisingly affordable) making life insurance accessible to virtually all families.
The cost of family life insurance depends on a few key factors, and it can vary from family to family. Insurers look at your personal circumstances and the type of cover you want to work out your premium.
Here’s what usually affects the cost:
The older you are, the higher the premium. Insurers see older applicants as higher risk, so starting sooner can often save money.
Any existing health conditions, past illnesses, or family medical history can affect your cost. In most cases, the healthier you are, the lower the premium is likely to be.
Smoking, vaping, or other higher-risk habits usually increase premiums.
Jobs with higher risk, like working at heights or with machinery, may lead to higher costs.
Different policies cost different amounts. Term policies are usually the most affordable, while whole life insurance costs more because it covers you for life.
The higher the payout you choose, the higher the premium. Most families choose an amount that reflects their mortgage, debts, or the income their family would need.
Longer-term policies are generally more expensive, as the insurer is covering you for a longer period.
Even with all these factors, family life insurance can be surprisingly affordable. Many families find that protecting their loved ones costs less than they expect.
The amount of Insurance to take out depends entirely on what costs your family would still need to pay if you or your partner were no longer around (and for how long). It’s important to consider expenses like:
Mortgage payments/Rent
Property maintenance
Utility bills
Childcare and school fees
Travel costs
Food and general living budget.
The family members who you choose to benefit from your life insurance policy can use the payout however they like. Typically, it’s usually spent on things like:
Repayments on a mortgage, or even clearing any outstanding mortgage
Replacing your wages, for day-today living costs
Children’s school or university fees
Covering funeral costs - in line with your wishes.
Taking out life insurance for your family gives them the freedom to continue to thrive in life, whatever they may need.
You may already have a life insurance policy in place but haven’t looked at it for some time. It’s certainly worth having a review to see if it still fits your needs and speaking with us to see if we could also save you some money.
Family life insurance is a great way to protect your loved ones, but it’s not the only option.
Depending on your situation, you might also want to consider additional cover, such as
critical illness cover.
This pays out a lump sum if you’re diagnosed with a serious illness, such as cancer, heart attack, or stroke. This can help your family cover medical bills, adapt your home, or simply provide financial breathing room during a difficult time.
Another option is income protection insurance. This pays a regular income if you’re unable to work due to illness or injury. It can help cover household bills, mortgage payments, and day-to-day living costs while you’re off work. It could be especially useful if your family relies heavily on your salary.
If you are in generally good health and are looking for life insurance, you can often get started online.
Here’s what to do make the process as easy as possible:
Think about whether term life, whole life, family income benefit, or joint life insurance is best for your family. Consider the amount of cover, the length of the policy, and whether one or both partners need protection.
Cavendish Online can compare quotes from leading insurers. Our advisers can help you find the right level of cover for your circumstances, ensuring your family is fully protected without overpaying.
Once you’ve chosen a policy, fill out the application with the required details. After this, your policy can be set up, and your family will be protected.
For any other type of life insurance plan, or if you have a medical disclosure, please speak to an expert on
01392 436 193 (Monday – Thursday 9am–5.30pm, Friday 9am–5pm)
Family life insurance isn’t just for parents. It can also protect your partner, cover a mortgage, or leave a financial legacy for loved ones. It can help protect those who rely on your income won’t face financial difficulties if you were to die unexpectedly.
If you divorce, you have a few options:
Keep the policy – You can maintain cover for yourself or your new dependents.
Split the policy – Some insurers allow the policy to be split into two individual policies.
Cancel the policy – You can cancel, but no premiums already paid are refunded.
Always speak to your insurer to see what options are available and update the beneficiaries if needed.
Learn more about how divorce affects joint life insurance.
It depends on your circumstances. A joint policy can be beneficial as it covers two people under one plan and usually pays out once, often cheaper and simpler to manage.
Whereas with a single policy, each person has their own policy, so payouts can be received twice, but premiums are usually higher.
Term policies only pay out if death occurs during the policy term. If you outlive the term, the policy ends, and no payout is made. However, you can usually set up a new policy to reflect your current needs.
Yes. Writing your policy in trust allows you to choose who receives the payout directly, helping your family avoid delays and potential inheritance disputes. Your adviser can guide you on how to set this up.
You can cancel at any time, but you won’t get back any premiums already paid. It’s worth reviewing your cover first, as your adviser may be able to adjust it rather than cancelling completely.
Our team of expert protection consultants are here to help. Call for a quick quote and more information now:
01392 241 850(Monday to Friday, 10am to 6.30pm)
