If you have someone who is financially dependent on you, life insurance can be an asset. In this article, we will go through some of the life insurance options that are out there for families. Whether you’ve got toddlers or teenagers, life insurance could benefit you.
What Life Insurance is available for families?
Everyone’s situation is different. Right now there are two common types of life insurance. These are types of life insurance that have conditions that tend to apply no matter what type you choose. They are:
Level Term Life Insurance: With this type of insurance, you will select a lump sum payout and the amount of time that the cover will last for. So, for example, you could select a lump sum of £100,000 that would be paid out upon death if the insured passes away within 30 years.
Mortgage Life Insurance: So with this type of insurance, rather than the lump sum payout remaining the same for the duration of the policy, it decreases over time. The idea behind this decrease is that it would decrease along with any outstanding loans/mortgage you might have. As with level term insurance, you would be covered for a specific amount of time that you agree when applying. This kind of life insurance can not only cover your mortgage but any other large loans you might have.
There are of course other policies that can be more expensive and can be a lot of pressure to take on, especially for a family. You may have heard of a Whole of Life Policy. This is where you would be insured for the rest of your life provided you keep up with monthly payments. It can be more expensive than other insurance policy types because the payout is guaranteed.
Let’s look at mortgage life insurance and put it into an example. John and Mary are just starting out as a family. They’ve just bought their first house and have one child. Their mortgage is valued at £275,000. One option that they could go for is a level term policy that would last 30-years. If either John or Mary was to pass away during this term the insurance company would pay £300,000. This could potentially cover the mortgage and help out with any day-to-day household bills.
Which might be better Single or Joint Life Insurance?
There are certain advantages to having joint life insurance. Most notable is that the premiums could be cheaper. With a joint life insurance policy from Choozi there are two payouts. There can be two separate payouts on both lives when they end. There are some other considerations to make with this kind of insurance policy. These are deciding when the payout is made and what happens if the partners break up.
No one wants to talk about divorce but it’s worth considering what could happen. With a joint policy, you could end up paying a lot into the policy. Once the policy ends there might not be anything paid out.
How does Life Insurance work when you have a family?
When it comes time to claim it will be a case of your nominated legal beneficiary receiving the lump sum payout. Payment of the benefit also depends on whether you have a single or joint policy set up. If you have a joint policy in some cases it may be paid out on either the first death or second death of the people insured.
If you want the money to be used for things like your children’s education you may need to write a Will. Leaving a legal document behind with your wishes can make it easier for your family. There are services both online and offline that could help you write a simple Will or even a complex one.
How much does Life Insurance cost for a family?
This can depend on what amount of money you are looking to be paid out. If you feel like you need a large benefit amount it could potentially cost a lot. Whereas if you’re in the position where you don’t need a huge amount of money paid out, it will be less expensive.
Another aspect to consider is the health conditions. If you are in poorer health then a life insurance company will view the policy as a higher risk. This will result in a higher cost for the policy premiums. There are options out there for people with poorer health though. One option is a guaranteed life insurance policy that offers a lower benefit amount but also lower premiums as it could give peace of mind.
Age tends to be another factor that can influence the cost. Potentially, the younger you are when you are taking out the policy the less expensive it can be. It makes sense that the younger you are the less chance there is that the insurance company could make a payout. The reason for this is because you are healthier and therefore less likely to make a claim on the policy. So, while you might not feel life insurance when you’re younger is worth it, it can stand to you as time goes on.
What happens when your circumstances change?
Life can throw up all kinds of surprises and changes can come quick. It’s important to know when the right time is to update your life insurance policy. With life insurance policies making changes can be relatively straightforward. In general, it’s good practice to check in on your life insurance policy at least once a year.
This is for many reasons. If you have a family you may have had another child and need more protection. Or there may have been a change in working circumstances like a job loss. It’s vital to make sure that you aren’t over or underinsured.
Protect your family with Choozi
Starting a family can be one of the scariest and most amazing things you can do in life. At Choozi we understand that a family is a precious thing. If you decide to compare with us, you can be confident that you are getting the right protection for your family. We are 100% impartial and are dedicated to finding the best deal for you. By comparing leading life insurance providers in the UK, we ensure that you’re finding a deal that works for you and your budget. For something that could mean so much for your family, it couldn’t be more straightforward.