Life Insurance for Parents: Everything you need to know

As a parent, you understand the importance of protecting your family financially. You may not have considered buying life insurance, but it's a good option for protecting your family and/or loved ones in the event of tragedy.

Many new parents or guardians may think they don't need life insurance because they're young and healthy, but that's not the case. It could provide a financial safety net for your family and/or loved ones if the unthinkable happens. We'll look at the key reasons why new parents and guardians should consider life insurance.

To protect your family's or loved one’s future

If you were to pass away, your family/loved ones may need help with expenses like mortgages, car payments, and childcare.

Life insurance may help parents/guardians ensure that their dependants' needs are taken care of going into the future. If you have debts, a policy may also help cover those costs and provide your family and loved ones with some financial security.

Single parents may also benefit from life insurance, as they may be solely responsible for providing for their children. Life insurance can help cover costs such as childcare, education and medical expenses, so that your children don't have to go without these essential items.

To lock in lower premiums

Life insurance premiums are typically based on age and health. So getting cover early could allow you to take advantage of low rates. If you wait until you're older or have a pre-existing condition, your premiums could be much higher.

For example, whole life insurance has fixed premiums that remain the same throughout the life of the policy. Therefore, it's important to get cover when you are younger, so you can lock in lower premiums.

With this kind of plan it is sometimes possible to pay in more than the sum assured is worth, so be sure to chat to an adviser before purchasing to ensure it is the right plan for you.

To provide for your children's education

Education is one of the best investments you can make in your child's or dependant’s future. With life insurance, you can set up enough funds to help fund their tuition and other educational expenses if you were to pass away.

To leave a legacy

Life cover can also be a way to leave a lasting legacy for your children or loved ones. Naming your children or loved ones as your beneficiaries could help ensure that they have a more secure financial future after you're gone. This can give you peace of mind, knowing that you're leaving a lasting impact on your children's lives.

If you are concerned about inheritance tax, you may want to consider writing your policy in trust. Writing your policy into trust helps to ensure that a potential payout goes straight to your beneficiaries and doesn’t end up in your estate where it may be subject to inheritance tax.

Learn more about writing your policy in trust.

To replace lost income

If you're the main source of income for your family/dependants, life insurance can help deal with any lost wages. This way, your family/dependants could maintain their standard of living, keeping up with expenses like rent or mortgage payments.

And if you’re not the main source of income, it’s still worth considering if your income or work would be missed by the household. Could your family/loved ones maintain their current standard of living without you?

For example - if you do most of the childcare, would your partner need funds to pay for day-care or a nanny if you were to pass away?

What type of life insurance cover do parents need?

Term life insurance

For parents paying a mortgage, the most common type of cover is term life insurance. This type of policy pays out a lump sum if the policyholder dies during the term of the policy. The money can be used to help pay off outstanding mortgage debt, ensuring that your loved ones will not have to worry about it in the future.

There are 3 types of term life cover:

• Level term - This type of policy pays out the same amount regardless of when you die during the term. Your premiums for this kind of policy are fixed.
   
• Decreasing term - The policy is usually taken out alongside a large loan or mortgage. The payout decreases over time, in line with a mortgage or loan. Your premiums for this policy are fixed, but start off cheaper than level term life insurance.
   
• Increasing term - The payout increases over time, usually in line with inflation. This way, the payout your children receive won't lose value. This option is also referred to as indexation or index-liking. It’s important to note that you should expect your premiums to increase with inflation as well.

Please note: the insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

Whole life insurance

Another option for parents is whole life insurance. This type of policy pays out a lump sum when you die, regardless of when that happens. It’s designed to provide financial security for your family if you die at any point in the future.

Whole-of-life policies tend to be more expensive than term life policies, but they offer greater peace of mind for the long term.

Please note: the insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit.

Joint life insurance

A joint life insurance policy is shared between two people - usually couples. It pays out a lump sum when one or both of the policyholders dies.

This type of policy can be useful for parents who are married or in a long-term relationship, as it can provide financial security for both partners and their children. It's often seen as a cheaper option when compared to taking out separate policies.

Critical illness cover

While it does not cover you from death, critical illness cover can be an ideal way to protect your family's income. The policy pays out in the event you are diagnosed with a serious illness, injury or disability. This could be a heart attack, illness or stroke which could prevent you from working and providing for your family.  Most critical illness plans also cover death for no additional cost.

How much does life insurance cost?

The cost of life insurance cover varies depending on the type of policy you choose and the amount of cover you need. Generally speaking, term life policies tend to be cheaper than whole-of-life policies.

Other factors include:

• Age - Generally, the older you are, the more expensive the policy will be.
   
• Health - If you have any pre-existing medical conditions, this could affect the cost of your policy. 
   
• Smoking - Smokers tend to pay more for life insurance than non-smokers.
   
• Occupation - Your occupation can also affect the cost of your policy, as some jobs are seen as higher risk than others.
   
• Amount of cover - The more cover you need, the more expensive the policy will be.

It’s important to shop around and compare different policies to find the best deal for you. It's also a good idea to speak to an insurance broker, who can help you find the right policy for your needs.

What Happens If You Can't Pay Your Premiums?

If you are unable to pay your premiums, there are usually a few options available.

For example, if you are struggling to pay your premiums because you’re currently off work ill, and your plan includes waiver of premium, your insurer will cover your premiums for you and you won’t lose the cover.

Alternatively, they may be able to grant you some sort of payment holiday or repayment plan.

It’s important to speak to your insurer before making any decisions about your policy. They will be able to provide more information and advice on what options are available.

How to apply for cover

Applying for life insurance cover through Cavendish Online is as easy as it gets.

If you’re happy to look into quotes without advice, you can simply fill out our online application form and provide some personal information, such as your age, occupation and medical history. Once you've submitted your application, we'll show quotes from leading providers for you to compare in a matter of minutes.

Alternatively, you can apply with advice by speaking to one of our expert life insurance advisers. They'll help you find the right type of cover based on your circumstances and budget.

Get advice when needed

If you're still unsure about which type of policy is right for you, then it's a good idea to speak to an advisor. You’ll benefit from their expertise and have the peace of mind that your Life Insurance policy is in place. They can answer any queries you may have, so you can make an informed decision. So don’t hesitate to get in touch today.