What is family protection life insurance?
Family protection is a type of life insurance designed to secure your family’s financial future, in the event of your death. It commonly takes the form of term insurance, which pays out a fixed lump sum to your dependents, if you die during the policy term.
The benefits of family protection:
- Provides a reassuring safety net for your family, in the event of your death
- Helps your loved ones with any financial pressures that arise after your passing, (i.e. rent or mortgage payments, day-to-day living costs, and household bills)
- Provides peace of mind that your family will continue to be provided for and able to maintain their standard of living.
Who might need family protection insurance cover?
Family protection life insurance is usually a very good idea if you have dependents that rely on you financially. For example, if you are the sole ‘breadwinner’ in the household and have young children.
There are different ways in which you can ensure the protection of your family if the worst were to happen. The most common in the UK is term cover, although family income benefit and whole of life are possible alternatives.
As with any form of life insurance, the policy you choose will depend on your personal circumstances – age, health, budget, level of protection, length of cover and how many dependents.
How does cover work?
- You select the amount you want to be insured for, setting it at an affordable level, that provides you with peace of mind your loved ones would be financially secure
- In the event of something happening to you, that is covered within the policy, your family will be paid an agreed lump sum
- The pay out could be used to cover the cost of your funeral, pay off the mortgage, fund family living costs, or provide a healthy nest egg for your dependents
- Remember, the higher the amount you wish to be paid out and the longer the cover term, the higher your monthly premiums.
Fix your monthly premiums
- Once you have found the right life cover that meets your needs, you can fix your premiums at the current level, for the policy term
- Securing family protection is cheaper the younger you are, but can rise steeply as you get older
- Fixing your life insurance premiums now means you won’t have to pay steep premiums in the future
- You can apply for family protection cover today, it only takes a few minutes.
Family income benefit
- This type of life insurance, unlike traditional policies that pay out a lump sum, provides your dependents with a fixed, monthly tax-free income
- Payments start after you die and run until the policy expires
- This cover is well suited to young families, as a regular income can make day-to-day budgeting easier long-term
- Beneficiaries will not have to manage/invest large lump sums, which can be easy to get wrong and often involve taxes and fees.
Whole of life cover
- Most insurance policies run for a fixed term, whether it be 10 years, 20 years or longer, but only pay out if you die during the term
- However, some insurance policies can run for whole of life, meaning your family will always benefit from your investment when you die
- Depending on your policy, a pay out could also occur if you suffer a critical or terminal illness
- Whole of life policies, although more expensive, guarantee to pay out to your loved ones at some point, unlike fixed term policies, which can be outlived.
An example scenario:
Desmond is a 47-year-old father of 3. He works as an IT consultant, earning £74,000 per annum. His wife, Eva, is a full-time mum to Ted (6), Holly (4) and Jack (2).
Being a single income family, if Desmond was no longer around, it would have a devastating impact.
How would Eva:
- Afford the mortgage repayments each month?
- Pay household bills?
- Meet the rising cost of bringing up children?
- Afford childcare if she were to return to work?
Desmond and Eva decide to secure their family’s future, by taking out level term life cover, protecting the whole family, until the kids are financially independent.
Because Desmond is still relatively young, in good health, a non-smoker and earns a good salary, he is able to take out a policy that is very affordable.
The policy not only covers their mortgage but would also leave a healthy sum to ensure the family could maintain their standard of living and leave a nice inheritance for the kids.
Learn more about the cost of raising a child in the UK, by reading Child Poverty Action Group’s ‘Cost of a Child in 2017’ report.
Joint or single policy?
- Dealing with financial hardship is not something we want to deal with whilst grieving, so it’s worth considering cover for your partner too
- Joint cover is usually cheaper than taking out 2 single life policies
- However, it is important to remember joint life policies will only ever pay out once, (normally upon the first death)
- This leaves the living spouse to renegotiate a single policy, (potentially at a much higher premium, due to being older).
Terminal illness cover
- Terminal illness cover can also be included in your family protection policy
- This ensures a pay out in the event that you are diagnosed with a terminal condition
- Some life insurance policies will include terminal illness cover at no extra cost
- Check which terminal illnesses are included on your policy and don’t assume all conditions are covered
- Cover pays out a fixed lump sum after diagnosis if you’re expected to die within 12 months
- The diagnosis usually has to be made by a medical professional, who specialises in that particular field
- A pay out can be crucial in getting your family through those last few months, funding things like family trips, funeral expenses, or flying relatives over.
Critical illness cover
A critical illness policy will pay out a lump sum if you’re diagnosed with a critical illness. Illnesses which are covered can vary from one policy to the next, (so please check), but often include:
- Heart attack
- Kidney failure.
All these critical illnesses, although survivable, will have a major impact on your lifestyle and ability to do things for yourself. This can mean you are no longer able to work, require a carer, or need expensive home alterations.
Critical illness cover ensures your family would have a source of financial freedom to cushion the blow of unexpected expenses, resulting from you falling critically ill.
Remember too, if you smoke your risk of suffering a critical or terminal illness greatly increases, as a result, your premiums with increase accordingly.
Important things to consider with family protection insurance:
- There is more than one policy option available to protect your family’s future security
- It’s a case of identifying which cover best meets your specific needs
- Cover will end if you don’t keep up with your monthly premium payments
- The younger you are when you set up your policy, the cheap your premiums with be
- Family protection can include critical illness and terminal illness elements
- You may need to factor in rising living costs, to protect your family’s long-term future.
Why use Reassured to secure the best family protection cover?
- We have vast experience securing 1000’s of customers comprehensive family life cover
- Life insurance is what we do, (it’s all we do), day in and day out
- We’ll search the market on your behalf, finding the most suitable and competitive quotes available
- 11,500 can’t be wrong! We have an ‘Excellent’ average Trustpilot rating – 9.6/10
- We’re completely independent, impartial and never charge a fee
- There’s no obligation for you to take out the cover we find
- We’re a non-advised brokerage – we simply listen to your unique circumstances and find the most suitable quotes.
Talk to our Reassured consultants on 0808 168 2025 about affordable life insurance cover and how we could help you protect your family. Alternatively Start Your Quote online today – it only takes 2 minutes.