Life insurance for parents

8 minutes

As a parent, you want the best for your children. If you’re looking to secure the brightest future for your children, life insurance that protects you as a parent can also help alleviate any stress for your child too.

Whether you’re a single parent, or a couple, a stay-at-home parent or just someone who is cautious about the future, life insurance for parents means that if you unexpectedly died, your children and the people who will care for them are financially secure.

The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser.

Why do parents need life insurance?

From nursery and education costs to clothing as they rapidly grow, the financial safety net life insurance provides for their children and family, should the worst happen, is one of the main reasons that parents choose to have life insurance. If you’re a parent you’re probably all too familiar with seeing your bank account drastically fluctuate as the expenditure from your children increases. As much as we love them, children do cost money.

As it costs around £200k on average to raise a child from birth to 18, having life insurance can help to provide a financial safety net in the event of an unexpected parental death. The £200k figure doesn’t include housing costs, bills, and any additional spending you may have.

The other reason is not leaving a financial burden on family members or close friends if you sadly pass away, and your children need to be cared for by someone else. By being able to provide an additional monetary fund to those who will be caring for your children you can help to provide them with an opportunity to live comfortably and for your children to enjoy their life.

When should you get life insurance as a parent?

Many parents, or parents-to-be, consider life insurance when they’re planning to have children, or fall pregnant. Once you have financial dependents who aren’t able to fend for themselves, your income suddenly becomes a lot more important. Life insurance policies tend to be cheaper the younger you are, so it can be worth getting a life insurance policy earlier in life.

What about same-sex couples who are looking to become parents?

For same sex couples looking to have children whether that’s surrogacy, adoption, or IVF treatments, it’s good to speak with insurers about a life insurance policy that would cover you as a couple for ultimate protection. Regardless of gender or sexual orientation any expecting couple should be eligible for life insurance.

If you wish to include some form of cover for your child, you can look to add critical illness cover for children. Children are eligible for this type of cover from birth till their 23rd birthday and can be:

  • Your biological children.
  • Any children you have legally adopted.
  • Any stepchildren.

What about single parents?

Single parents may want to set up a single life insurance policy, especially if you’re the sole carer, or are sadly a widow. You may also want to write this policy in trust to ensure the money goes to where it’s needed, rather than being split in ways that may not benefit your children, such as relatives who don’t actively care for your children. This can also help get payments out to the right people quicker.

How much life insurance should new parents get?

If you’re considering a life insurance policy just before your new baby arrives, then you’ll need to factor in the additional cost that a child brings. As we said above, it costs around £200k on average to raise a child to 18. That doesn’t include the cost of potentially needing a bigger house to cope with your new child!

Therefore, you should consider including:

  • Housing costs (mortgage, rent and maintenance)
  • Living costs (everyday bills, food, restaurants, activities)
  • Transport costs
  • Medical costs, such as prescriptions

These should then be added together with the cost of raising a child, which will give you the total sum you might want to include in your life insurance. If you’re unsure, you can also call Life Search, our preferred partner, who we've proudly chosen to offer customers independent financial advice for protection products.

Should you include critical illness cover as a new parent?

As a parent, or soon-to-be parent, knowing that if you fall seriously ill and might not be able to care for your children is a thought that’s almost not worth thinking about. However, while it is a horrible thought, a critical illness cover policy provides extra peace of mind if the unthinkable was to happen, and you were diagnosed with a serious life changing, or life limiting illness.

You can also get children's critical illness cover, which gives you the financial freedom to care for your children if they are diagnosed with a critical illness, as well as providing funds to help towards any medical and associated costs. As LV= we provide children’s cover at an additional cost, so it’s best to check with your provider to see what they offer.

What life insurance policy options are available for new parents?

As with other insurance policies, parents have certain options when taking out life insurance. These are the main types of life insurance policies you’d want to consider, as well as any additions, like critical illness cover.

The two types of life insurance that parents often take out are decreasing term and level term.

Decreasing term life insurance

Decreasing term life insurance is mainly used by those to cover the amount owed on a mortgage. Repayments are based on the amount you borrowed from your mortgage lender plus interest, known as a capital and interest or a repayment mortgage. This will ensure that if the people listed on the mortgage sadly pass away, any debt can be paid off with the payout from the life insurance policy.

For new parents, this can mean you know that if the worst were to happen, your children would still have a home to live in, taking away the potential financial and emotional upheaval of having to move home, and giving time for friends and family to step in for support.

The only downside here for parents is that as the policy continues, the payout received does decrease. This means it’s not suitable to cover other debts, or to provide cover to help towards your children's living costs, to enable them to live on into adulthood.

Level term life insurance

Level term life insurance is where the death benefit or payout remains the same throughout the policy. This can be good if you have a series of fixed costs that are unlikely to change, such as rental payments, children’s education or nursery fees, and other costs.

If you’re a parent, this means your children’s future will be protected for a certain period with a sum of money that lets the people who are looking after them give them a comfortable life.

A downside to level term life insurance is that it doesn’t account for inflation. If you choose the minimum cover amount needed and the worst does happen, you could be at risk of running out of money as the amount of cover will not have increased to keep up with inflation.

At LV= we only offer inflation-linked cover through financial advisers. If you are interested in your cover keeping pace with inflation, please speak to a financial adviser.

Are you a parent looking for life insurance?

LV= can help. We can offer life insurance to parents, whether single, or couples. See what our life insurance could offer you and your family.