Life insurance for dads

16 min Read Published: 03 Jun 2021

Life insurance for dads Life insurance for dads helps build the safety net that a family needs to ensure that they are able to pursue their lives without financial difficulty if they die prematurely.

In this article, you'll learn why dads need life insurance; how it works; what it costs and how to buy the best life cover at the cheapest price. We've also taken a look at free parent life cover. 

If you just want to know the best way to buy your life insurance at the best price and receive up to £100 cashback, skip ahead to the end of the article.

Why do dads need life insurance?

If you die, you leave a big gap in your child's support system. Whether your main role is to provide financially or as a carer for your child, there is a cost involved in replacing this and you should explore what that cost will be and how it can be filled.

Costs that may need to be covered:

  • Childcare
  • Cost of living
  • Mortgage/rent
  • Funeral costs
  • Future costs such as further education

You also need to think about who will end up caring for your children if you pass away so you can establish what means they will have at their disposal. Essentially, you have to work out how much money they will need to cover the cost of continuing your children's upbringing until they are adults and can fend for themselves.

How does life insurance for dads work?

You have a choice of providing your family with a lump sum of money; a regular income to live on or a bit of both so that they can put the lump sum away for the larger costs and use the income for everyday living.

Buying a bit of income and lump sum life insurance doesn't have to be expensive and sometimes it can give you more insurance for your money. Speaking to a life insurance expert* will help you make the best use of your money as they can package things up to suit your situation and your budget.

Here are the three main types of family term life insurance:

How many years of life insurance do I need?

Life insurance can be bought for a specific number of years and this is called 'term life insurance'. It can also be bought for the rest of your life when it is called 'whole of life insurance'. Generally, your children aren't going to be dependent on you for the rest of your life but in cases where children have special needs, you may need to look at the whole of life insurance option.

Most parents need a term life insurance policy because their children will eventually gain independence and stop being reliant on you financially. There's no hard and fast rule about what age you should protect your children up to but you should consider 18 years old as a minimum and if you think you'll be supporting them through further education then, perhaps until they are 23 years old. Some parents buy their life insurance so that it carries on for a bit longer than this too because in reality, more and more young adults are still living at home.

If you are planning on having more children, try to plan ahead a little and work out how many years of life insurance you'll need between the youngest child's age and when they will reach independence.

Possible life insurance solutions

Example Scenarios Suggestion for number of years of life insurance Suggestion for type and amount of life insurance
  • 1 child aged 2 and plans for another child within the next 3 years
  • Cost of providing for the children will be £1,500 per month
  • Anticipated future needs such as education, weddings and help to buy first homes - £70,000
  • 26 years of life insurance will take the 2 year old and the planned child to age 23 when they will complete further education
  • £18,000 of annual family income benefit over 26 years (index-linked to track inflation) +
  • £70,000 of level term assurance over 26 years (index-linked to track inflation)
  • 3 children aged 12, 10 and 7
  • Cost of providing for the children will be £2,000 per month and partner can cover £1,000 of this
  • Anticipated future needs such as education, weddings and help to buy first homes - £120,000
  • 16 years of life insurance will take all children beyond the age of 23 to allow them to complete further education
  • £12,000 of annual family income benefit over 16 years (index-linked to track inflation) +
  •  £120,000 of level term assurance over 16 years (index-linked to track inflation)

NB - the above life insurance solutions will not cover your debts, mortgage and funeral costs and you should address these if they are relevant to your circumstances

Is life insurance tax-free?

Yes, there is no tax payable on the money that is paid out through life insurance as long as you arrange a trust with it.

The trust is a legal document that states who will distribute the money (your trustees) and who will benefit from the money (your beneficiaries). You make your choices and the life insurance company keeps this information with your life insurance details and if there is a claim, they follow the instructions on the trust. This avoids the money going into your estate after your death and potentially becoming liable for inheritance tax. 

Life insurance for working dads

If you work and earn an income that provides for your children you need to think about the loss of income to your household if you die. You should consider how much money will be needed to continue raising your children without your income. It's also wise to think about what changes might take place if you did die. Your partner may have to give up or reduce their working hours to manage the household by themselves and that might result in even more loss of income into the household. 

Having a chat with the people in your life who would step in to help and work out what they'll need to prevent hardship financially.

Life insurance for stay at home dads

Stay at home dads usually provide a lot of the care for children as well as carrying out household chores, shopping, pick ups and drop offs. If your partner works, think about whether they would give up work or just pay for childcare. Your life insurance should provide the extra money that will be needed to either pay for childcare or replace the reduction in your partner's earnings.

Life insurance for single dads

Raising children on your own means that there is an even larger impact on them if you die. Without the backup of another parent, you will need to think about who will step in to care for your children and what means they have at their disposal to do so. Decisions around where they would live can be entrusted to your chosen guardian through stipulating this in your will.

Life insurance should be built around how much money the guardian will need to help raise the children. Linking the guardian to the life insurance by nominating them as a trustee so they have access to the money that is paid out can be wise. Remember that a trustee is legally obliged to use the money for your nominated beneficiaries.

How much does life insurance for dads cost?

Non-smoker £300,000 of level term life insurance over 25 years £30,000 of annual family income benefit over 25 years
20 £6.26 £8.41
30 £8.61 £13.32
40 £17.77 £26.06

 

Smoker £300,000 of level term life insurance over 25 years £30,000 of annual family income benefit over 25 years
20 £9.31 £13.40
30 £16.46 £23.68
40 £41.66 £56.19

Additional insurances for dads to think about

Death can feel like the worst thing that could happen to you so you want to insure yourself against it. But it's also the less likely thing to happen to you if you compare it with your chances of becoming ill and unable to work. You should look at illness insurances while you're looking at life insurance because these can be incorporated into your personal insurance plan. 

Take a look at these illness insurances:

Free life cover for dads

Options for free parent life cover:

Aviva free parent life cover Post Office free parent life cover

(Currently unavailable)

 

  • £15,000 per policy
  • One policy per parent, per child
  • Child must be under the age of 4
  • No payment details needed
  • Expires after 12 months
  • Excluded anyone who has had a diagnosis of or treatment for cancer within the last 12 months

 

  • £15,000 per policy
  • One policy per parent, per child
  • Child must be under the age of 4
  • No payment details needed
  • Expires after 12 months
  • Excluded anyone who has had a diagnosis of or treatment for cancer within the last 12 months
  • Provided by Royal London Mutual

Is free life cover worth it?

Not really - it's a way to get you signed up with the insurance company so that when it runs out, you take your full life insurance with that company. The insurance company give you a really small amount of life insurance for one year - it's nowhere near what most families need to meet their financial commitments.

So, you end up extremely underinsured for a year and at the end of the year, you either forget to replace it with a full life insurance policy or you remember to and just fall into buying it with that insurance company instead of shopping around. Either way, it's not a great outcome.

The only situation where it is probably useful is if you've got the life insurance you need and this is a free boost to that life insurance.

It can create a false sense of security without addressing the real needs of any family.

How to find the best life insurance at the cheapest price for dads

To find the best price and be confident that the insurance gives you the right financial protection, you'll need to search the whole market. This doesn't have to be challenging because you can use a comparison site to find the best prices and apply online.

Do be careful here - even though a lot of comparison sites say they are searching the whole market, very often, they're searching a handful of insurance company's prices. Furthermore, the prices are only based on your age and smoker status and you could find that as soon as you complete the application form, the price changes because of how you've answered the questions. You'll also find that you won't get help with completing trust forms to nominate your beneficiaries and avoid inheritance tax.

The best way to buy your life insurance is to speak to a life insurance expert* and discuss your situation. They'll talk you through all your options and ask you for your budget so that you maximise what you're getting for what you want to spend. The key advantage here is that they have access to the whole market. They also complete your application over the phone so you don't have to do this and will guide you through setting up your trust.

As a Money to the Masses reader you'll receive up to £100 cashback if you buy your life insurance with the experts.

 

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