Life insurance for parents – should you have it?

9 min Read Published: 31 Aug 2023

Life insurance for parents - should you have it?Life insurance is commonly used by parents to create financial security in case the worst were to happen but many do not know where to start. Many people understand the need to buy life insurance to cover a large debt, such as a mortgage because the mortgage lender or broker suggests this. However, midwives and other professionals you meet when having children, don't usually suggest life insurance for new parents.

It is important for parents (especially parents of younger children) to have life cover in place because the impact of losing a partner or spouse, as well as an income, could be both emotionally and financially crippling.

In this article, we explain the life insurance options that exist for parents, as well as how much life cover you should buy for your family and which type of life insurance is best. We also tell you the best place to compare life insurance quotes to guarantee the cheapest quotes.

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What is life insurance for parents?

Life insurance for parents is a personal insurance policy that parents can buy to cover their own life against death or to cover someone else - your parent or partner - against death. Parents' life insurance is designed to cover your family while they are dependent on you - either for care or financial support. If you die during this time, the parent life insurance will pay a cash lump sum or a regular income to prevent your family from suffering a financial loss.

How does life insurance for parents work?

Parents' life insurance is normally a term life insurance policy which is life insurance that covers you for a set period of time (the policy term) and only pays out if you die within that time period. Term life insurance suits parents as you can choose a lump sum life insurance, life insurance that pays an income or a combination of both.

You will pay a monthly or annual premium to pay for your insurance which, unlike home insurance and car insurance, does not need to be renewed as it simply continues to cover your life for the term that you choose at the outset. If you die, a claim will have to be submitted with a copy of the death certificate so that the life insurance company can pay the amount of money that is set out on your policy terms.

Most life insurance policies also include terminal illness benefit free of charge with your life insurance which can pay the death benefit early if you become seriously ill and have less than 12 months to live.

Additional benefits that pay out if you become seriously ill can be added at extra cost so that your insurance pays out a sum of money in the event that you are diagnosed with a medical condition such as a heart attack, stroke or cancer.

Choosing the right type of life insurance for parents

Parents can have more than one financial concern and often do - these concerns can include repaying a debt, keeping up with mortgage payments, paying for household bills, childcare and further education costs. Your personal circumstances as a parent will determine which types of life insurance are right for your needs. Below, we explain the most popular types of life insurance policy available, who should consider them and for what reason.

Types of parent life insurance and what it covers

Type of life insurance Repays a mortgage debt Pays for large costs like further education & weddings Covers regular household outgoings which could include a mortgage payment Pays for childcare Covers funeral costs
Level term life insurance tick tick tick tick tick
Family income benefit tick tick
Decreasing term life insurance tick
Whole life insurance tick tick tick tick tick
Over 50s life insurance / Funeral plan tick

The above table indicates where a particular type of life insurance policy is suited to a need - where we indicate that it is not, this may be because there are more suitable types of life insurance to cover that specific need

Level-term life insurance and whole-of-life insurance are the most versatile life insurance types as they pay a lump sum of money that could be used for a number of different purposes. However, whole life insurance is far more costly than level-term life insurance as it covers you until you die - level-term life insurance will only pay if you die within the chosen term.

Decreasing Term Life Insurance is usually bought to cover a large debt such as a mortgage. The amount you are insured for decreases each year in line with the debt. Premiums for this type of policy are usually cheaper than 'Level Term' assurance. For more information, check out our article 'Mortgage life insurance, what is it and should I have it?'.

Over 50s life insurance and funeral plans in particular are usually suited to parents over 50 years old. This type of policy is not underwritten so applications are guaranteed to be accepted which can be useful if you have health conditions that make it difficult to qualify for other types of life insurance. Premiums are paid monthly or annually and are usually guaranteed so will not increase over time. For more information on Over 50s life insurance, check out our article 'Which is the best over 50s life insurance?'.

Best life insurance policies for parents

Level Term Assurance

This is the most popular type of life insurance for parents and can be arranged to cover a large debt such as a mortgage or to provide a lump sum for you and your family (or both). The amount you are insured for remains the same throughout the term of the policy, meaning that you'll always know how much you are insured for; this makes it a popular life insurance option for parents. For more information, check out our article 'How much does life insurance cost?'.

Family Income Benefit

A type of decreasing life insurance policy that is designed to reduce as your need for life cover reduces over time. Rather than pay out a large lump sum if you should die, it pays out a guaranteed, tax-free, monthly income of your choosing until the end of the policy term. An income can often be a more manageable way to receive money from your life insurance as it is manageable and easier to budget. Family income benefit policies are generally cheaper than level term assurance because the potential payout on a family income benefit policy reduces over time. The quotes for a family income benefit plan are cheaper than level term life insurance so it is perfect for parents on a budget. For more information, check out our article 'What is family income benefit life insurance and should I get it?'

Should both parents have life insurance?

Yes, it would make sense for both parents to have life insurance, even if one parent isn’t earning an income. It is important because if the non-working parent was to die, the working parent would likely have to either give up work completely, reduce their hours significantly or employ someone else to look after the children and each of these scenarios would have a significant financial impact on the family.

Parents are usually tempted to buy a joint life insurance that will payout on the first death to take place. Although this type of policy covers both parents, guarantees to pay out the sum insured should either parent die and is often the cheapest way to insure both parents, it does mean that the surviving partner is left with no life insurance once a claim has been made.

A better option for most parents is for each parent to arrange individual life insurance so that they have a single life policy each.  This in effect doubles the amount of cover you have in place and ensures that should either partner die, the surviving partner would continue to be insured. Interestingly, even though two single-life policies provide double the cover, the premiums are often only around 10-20% more than a joint-life policy so it is worth getting some quotes to see what the cost would be. We explain more about where to buy the best life insurance policies for parents later in this article.

How much life insurance do I need as a parent?

This is a tricky one to answer as each parent's situation will be different and their preferences are unique to them too. The best way to know for absolute certain is to speak to an independent life insurance specialist* as they will be able to establish your needs and priorities to tailor the life cover correctly.

There are however some general rules that can be applied in order to work out roughly how much life insurance you may need:

  • Debts - make sure that your debts are covered so that the people who are left to pick up the pieces won’t be burdened with your debt. This includes credit cards, loans, car finance and enough to cover the outstanding amount on the mortgage (if you have one).
  • Funeral - make sure there is enough money to comfortably cover the cost of your funeral. A funeral is a stressful situation at the best of times without the additional worry of how to finance it.
  • Living - you need to replace your income or create the financial means to cover your household duties. The policy should be taken out over a long enough period to ensure that your youngest child has finished education and is no longer financially dependent. Remember, if you hope or plan for your children to go to university, this can mean taking a policy up until they reach their mid-20s to allow them enough time to complete their studies and start working to support themselves.

Using these three general rules above you can start to build a rough estimate of the amount of life insurance cover you may need.

Parent life insurance example

To help you think along the right lines, we have demonstrated how you may choose the amount of life insurance that is right for you based on an example scenario.

  • Parent 1 aged 35 is the main earner with a net monthly income of £2,000
  • Parent 2 aged 38 works part-time with a net income of £1,200 and provides most of the childcare
  • 2 children aged 8 and 12 years old
  • The mortgage outstanding balance of £160,000 is on a repayment basis with 20 years remaining on the term and an £800 monthly payment
  • Credit card balances totalling £5,000
  • Regular essential outgoings of £1,700 per month

Life insurance solution for Parent 1 & Parent 2 individually

Reason for cover Life insurance solution
To repay the mortgage £160,000 of Decreasing mortgage life insurance over 20 years - this will relieve the family of any mortgage commitment and ensure that the family can continue to live in their home
To provide for outgoings £12,000 of annual Family income benefit life insurance that will provide the family with £1,000 monthly to supplement Parent 2's income to meet the essential outgoings and allow for any reduction in their income due to reduced hours
To create financial security £50,000 of Level term life insurance so that the family has money put aside to pay for future education costs or to support the family with weddings, buying another home or anything else they may need.

It is worth remembering that most people will need less life cover as they get older, as debts tend to reduce over time and children become less financially dependent as each year passes. The above example does not take this into consideration and so as each year passes you are paying for more cover than you necessarily need. If the monthly premiums are affordable then this is not necessarily a problem, however, there are ways to ensure you are only covered for what you need by taking out a policy that reduces in value over time, such as Family Income Benefit.

How much does life insurance for parents cost?

Life insurance premiums can start from as little as £4 per month and are calculated based on a number of factors including:

  • the amount of life cover you choose
  • the period over which you take the cover
  • your age
  • your health
  • your family's medical history
  • the type of job you do
  • whether you do any dangerous sports or hobbies
  • whether you smoke

For more information on the cost of life insurance, check out our article 'How much does life insurance cost?'.

How to arrange the best parent life insurance

The best way to buy life insurance for parents is to speak to an independent life insurance specialist, such as LifeSearch* as they can search the whole market for you as well as provide tailored advice. Additionally, LifeSearch can help to complete the application forms, chase the insurance company on your behalf as well as offer up to £100 cashback when you buy a policy.

Simply complete this short form* for a callback at a time that suits you. Alternatively, you could use an online comparison site, but remember that online comparison sites cannot provide tailored advice and so you'll need to know the type of cover you need as well as the amount.

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article - LifeSearch