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Life insurance for mums
28 Jan 2022
Raising a family is expensive though. Between the thousands of nappies and the hundreds of days of childcare, the tab can run up pretty quickly. The cost of raising a child to 18 in the UK can soar up to a staggering £151,000 for couples and £185,000 for single parents.
The big question is… who would foot this bill if you weren’t around anymore? If something were to happen to you or your partner, how would this impact your little one? No amount of money could ever replace you or your partner, but it can really help during the worst times to cover costs and lessen all the financial stresses of losing someone you depend on.
So why is life insurance for mums so important?
Life insurance might not seem like a priority amongst the millions of other things you have to spend your hard-earned pennies on - but it should be, precisely for this reason. “But nothing is really going to happen to me or my partner!”, we hear you cry. Well, we hope you’re right, but the facts are that in the UK a parent with a financially dependent child dies every 22 minutes, and 41,000 children annually lose a parent before they turn 18.
Children need a lot of care and attention, as well as a stable home, so a reliable income is vital. For starters, there’s rent or the mortgage to consider so your child will always have a roof over their head. The last thing your loved ones are going to want to deal with on top of your passing is potentially losing their family home. There are also debts and loans to consider - these don’t just go away when you die, which means your loved ones will be hit with your debts too.
On top of this, there are the costs that come directly from raising a child, like food, clothes, nappies, school uniforms… you know the drill. The never-ending shoe buying, the pricey picky eating… all of these costs need covering somehow. Chances are that whilst one parent is out earning the money, the other is staying at home looking after the baby. If something was to happen and there was only one parent around, you might have to start paying for childcare (or for more childcare if you already do), which can be really expensive and make it difficult to keep up with necessary everyday spending. Life insurance could be the safety net you need to make sure that these costs can be covered.
If you’re a single mother, life insurance is even more important as there’s no one to pick up the slack. You’re a superhero already - why not save the world for your little one even after you’re gone?
How does life insurance work?
Life insurance pays out a tax free lump sum after you pass away. It’s super simple and designed to help you protect the life you love.
When you buy life insurance, there are a couple of things to consider. How long do you want to cover yourself for? Maybe until your children are 18? Or through University? Or longer? Do you want decreasing or level term cover? Does this all sound like a foreign language to you? We’ll walk you through your choices.
Life assurance, or whole of life cover, which covers you until you pass away. Decreasing or level term policies only cover you for a fixed number of years, so you’re not guaranteed a pay out, whereas whole of life cover will pay out when you die, no matter when that is. However, this makes it quite a bit more expensive.
A decreasing term policy is designed to cover a debt that decreases over time, like your mortgage. Your payout will decrease as the years go by, so the final pay out may not be enough to do more than pay off the debt you took out the policy for - but if you only need to cover that debt, decreasing term cover might be perfect for you.
A level term policy pays the same agreed amount and lasts for the length of time you choose. For instance, if you know your family are going to need financial support for the next 18 years, then you’d take out a policy that lasts 18 years. It’ll payout a lump sum to help cover the necessary costs and help your children get by until they can stand on their own two feet.
There are other options besides a life insurance policy, however, with types of cover like critical illness cover there to help you pick up the pieces if you get seriously ill, or family income benefit, which can help to cover your family’s living expenses with monthly payments.
How does Family Income Benefit work?
If family income benefit (or FIB) has caught your eye, you’re not the only one! For many families, it’s a better choice than life insurance. FIB differs from life insurance as it provides regular tax-free income, rather than paying out a lump sum. Whether the family’s main earner has passed away or has been diagnosed with a serious illness, FIB relieves financial stress and ensures that you’ve still got some money coming in to keep things afloat when times are hard. Receiving the payout monthly or quarterly instead of in one large chunk can make budgeting and managing this money much more simple.
Similarly to life insurance, when you take out your FIB policy, you can decide how long you’d like it to last. As a parent, it’s probably a good idea to opt for this to be the length of time until your children are financially independent; so perhaps 15-18 years. You could also opt for it to last until your mortgage is paid off.
When you make a claim, you will receive pay outs until the end of your policy. For instance, if you chose a 25 year term, and claimed on this policy a year in, your policy would continue paying out for 24 years. If you claimed after 20 years, you’d only receive payouts for 5 years until your policy runs out.
How can LifeSearch help?
If you need a little help picking out an insurance policy that will cover you and your little ones how you want to be covered, get in touch with us here at LifeSearch, so we can help you protect the life you love. We know that the amount of options can be mind boggling, so we’ll take the pressure off and do the hard work for you when it comes to finding the right life insurance policy to protect your young family. Give us a call on 0800 316 7253 and we can help.
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