Protecting your family is every parent’s priority. Here’s how to ensure your little one will be financially secure should anything happen to you
Not everyone needs life insurance. But if you have anyone who is financially dependent on you, for example your partner or your kids, then life insurance is an easy way to provide for them if you’re not around.
What is life insurance?
It’s simply a type of insurance that pays a sum of money if you die. So if you take out life cover for an agreed length of time and die during that period, your family will receive a lump sum payment. This money can be used in any way you like, but could go towards paying off the mortgage, or just covering the day-to-day expenses associated with bringing up children.
What you need to think about
There are several things you need to consider when you take out life insurance:
1. The amount of cover you need
How much life cover you need will depend on your personal circumstances, for example your outstanding mortgage and other debts, plus money to cover the cost of bringing up your family.
2. The number of years
For example, you could end your life insurance term once your mortgage has been paid off, or when your kids have finished their education and you’re no longer financially supporting them.
3. The kind of cover
You can choose from family cover, which pays a lump sum in the event of your death, or a ‘decreasing term’ policy – also known as mortgage cover – designed to pay out if you die during your mortgage term. The sum paid decreases as the payments due on the mortgage shrink.
You may also be interested in Critical Illness Cover, which is a common add-on to life insurance. It pays out if you are diagnosed with one of the critical illnesses specified in the policy.
4. Joint cover or single cover?
For two parents, you could take out a joint policy, which covers you and your partner and pays out on one of your deaths. Alternatively, you could take two single policies, for example Tesco Bank Life Insurance, which costs slightly more but you’ll get double the cover.
5. Your age and health will affect the price
The younger and healthier you are, the less you’ll pay for cover. If you smoke, you will pay more.
6. Check your existing policies first
Many employers offer ‘death in service’ benefits – another name for life insurance – as part of a company benefits package. If this is the case for you, you might still want to take out a separate policy in case you decide to leave your employer, but may not need to take out as much cover.
Find out more about life insurance
If you’d like to speak to someone about your life insurance needs, Unbiased.co.uk can help you find an independent financial adviser in your area.