This post may contain affiliate links which is shown by a *. This means if you click on a link I may get a small commission at no cost to you.
This is a guest article from award-winning life insurance broker Reassured
As a parent there is nothing worse than the thought of dying and leaving your children without your love and support. But whilst your emotional presence can never be replaced, there is a way to secure the financial future of those you love most.
Life insurance can ensure that if the worst were to happen, your children would be able to stay in the family home and afford to maintain their current lifestyle. All this whilst avoiding the financial burden of any existing debt you may have incurred.
But scarily, only 50% of parents in the UK have life insurance, (source: Legal & General).
Why aren’t more parents covered?
Ultimately, a lot of people donít like to address the inevitable, that one day they will no longer be around. Unfortunately, this often leads to inadequate future provisions being put in place for loved ones.
Looking after children is expensive; £231,713 per child over the course of 21 years to be exact, (source: The Money Charity). This means that many family budgets are tight, and taking on another monthly outgoing is avoided where possible.
But life insurance doesnít have to be expensive! Some insurers offer cover for as little as £4 per month, it ís just a case of comparing the market and finding the right deal to suit your budget.
A great way to save money is to take out life insurance when you are young, locking in very low premiums. Alternatively joint cover is an option, where you pay one monthly premium.
Life insurance policy options for parents
There are various policy types available to parents. Some of which will be more suitable than others, depending on what it is you are wishing to protect. Those most common are:
- Level term life insurance – A fixed lump sum is paid out upon your death, if you pass during the policy term
- Decreasing life insurance – A lump sum is paid if you pass during the policy term, but the value of the pay out decreases over time
- Family income benefit – Upon your death, an agreed monthly income is paid for the remaining term of the policy.
It is possible, budget permitting, to take out multiple policies simultaneously to allow for different types of cover to be had.
What can life insurance cover?
The type of life insurance you choose will depend on your loved ones needs. Commonly a policy will cover:
- The remainder of the mortgage
- Daily living expenses
- The children’s education
- Your funeral and legal costs
- Repayment of any outstanding debts
- An inheritance for your children.
Certain policy types are more suited to specific situations. For example, decreasing term insurance would be more appropriate if you were looking to cover large amounts of debt such as a repayment mortgage, as the pay out sum decreases in line with the remaining balance.
It is not uncommon for people to have to borrow money, take out credit cards or even sell personal belongings in order to pay for the funeral. Taking out level term life insurance could provide a cash lump sum to cover this cost, along with any associated legal bills.
Equally, the lump sum pay out could be used to provide an inheritance for your children, providing them with financial stability in adulthood towards purchasing their own house or starting their own family.
Finally, family income benefit (FIB) could help to ensure your children are able to continue their current lifestyle even if you pass away. FIB provides monthly payments to your family for a set amount as specified on the policy.
This can mimic the amount that would be lost from your salary if you were to die so that your family doesnít experience the strain of financial loss from your income.
It is often assumed that stay-at-home parents do not require life insurance as their death will not result in any loss of income. However, this couldnít be further from the truth.
Whilst a stay-at-home parent may not bring any tangible earnings into the household, their death could result in an inadvertent financial loss.
For example, if a stay-at-home parent died it is likely the remaining parent would need to either reduce their working hours or fund additional childcare both of which would result in less disposable income.
Covering both parents ensures this financial loss isnít experienced as the pay out can be used to cover these costs.
Enjoying your final days as a family
For many parents, providing their children with positive experiences in life is as important as providing them with financial stability.
Critical illness and terminal illness cover are two additions which can be included within your life insurance policy. If you are diagnosed with a specific illness or are given 12 months to live, you can receive an early pay out.
Whilst this can be used to cover expensive medical bills or to carry out necessary adaptations to the family home, it can also be used to enjoy the remaining time as a full family – final holidays and building lasting memories for your children.
Life insurance in summary
- Life insurance can secure the future financial stability of your family
- It can be affordable even on a tight budget
- What you are looking to cover will influence the type of life insurance you choose
- Policies can be taken out simultaneously to allow for different types of cover
- Stay-at-home parents also require adequate life insurance
- It is possible to receive an early pay out to enjoy your final days as a family and build memories
- The younger to take out cover, the cheaper premiums are.
This is a collaborated post.