Having children is a huge responsibility. As well as having to provide around-the-clock care, you take on a financial responsibility for ensuring your children grow up happy and healthy.
So, if something were to happen to you before your children became adults, what would happen to them?
Could they remain in your family home? Would they be able to maintain their lifestyle? And could they still fulfil all their ambitions – to complete their education, go to university, and buy a home of their own?
If not, then it’s time to think about putting some protection in place to ensure they would receive financial support if the worst happens.
Despite how important it is to protect your loved ones, new research published by consumer champion Which? has revealed that more than 1 in 3 parents in the UK don't have any form of life insurance.
In addition, the proportion of people who have put some protection in place varies significantly around the country.
Read on to find out more about this worrying statistic, how many people have life cover where you live, and for a cost-effective and valuable way you could protect your children.
36% of UK adults with dependants have no life insurance
If you were to die when your children were young, your family could face significant financial disruption. They would lose your income and still have to pay their rent or mortgage, and bills.
Despite this, research published by Which? shows 36% of adults with dependants don't have any form of life insurance. This lack of cover could leave millions of families vulnerable if the worst happened.
The research suggests homeowners with dependants have outstanding mortgages averaging £133,000, while renters pay an average of £666 a month for housing.
If you were to die with no cover in place, your family may have to continue to pay these commitments on much reduced means. They may have to sell the family home or move to cheaper accommodation to get by.
The percentage of people with life insurance varies around the UK
There is also a huge difference in the proportion of parents with cover in place depending where in the country you live.
People in the East Midlands are most likely not to have put any protection in place, with almost half of parents worryingly having no life cover. Meanwhile, parents in Northern Ireland are more financially secure, with fewer than 1 in 4 not having any life protection.
Neal Cross from the firm who commissioned the research says: “Life insurance can provide some peace of mind by covering major outgoings like mortgages and rent, meaning that your dependants aren’t left struggling to pay the bills.
“However, over a third of Brits with dependants still don’t have any protection in place. There’s a common misconception that life insurance is expensive but, with policies starting from as little as £4.74 per month, the reality is that it’s much more affordable than many first think.”
When it comes to putting protection in place for your children, family income benefit can be an excellent and cost-effective solution. It will ensure your loved ones receive financial support if you pass away, and it won’t break the bank.
Here’s a cost-effective way to protect your children
As households in the UK continue to face cost of living rises, millions of people are finding themselves working to a budget.
Indeed, FTAdviser reports that, according to insurer LV's Wealth and Wellbeing Monitor, in the first quarter of 2022:
- 1 in 3 UK adults are worried by rising prices of everyday items – up from 1 in 4 in September 2021
- People over 55 are the most likely of all age groups to be worried, with 36% concerned about the rising prices of day-to-day items
- 2 in 5 women are anxious about rising prices as are 1 in 4 men.
If you want a cost-effective way to protect your children, family income benefit can provide a useful alternative to traditional term assurance. It’s particularly useful if you have younger children.
One of the reasons it can be cheaper than other forms of life insurance is that it is “income based” rather than “lump sum” based.
While a typical term assurance policy pays a lump sum if you died within the term, family income benefit pays a monthly tax-free amount. This sum is paid regularly until the end of the term or on death or diagnosis of a terminal illness.
So, rather than a term insurance that might, for example, pay £100,000 if you die within 20 years, family income benefit pays a regular monthly amount. So, you might choose to insure yourself for £2,000 a month for 20 years.
You pay a regular premium and cover will remain in place for a specified length of time. The term of the cover is typically designed to cover your children, so you might want to cover them until age 21 or 25, or when they are financially independent.
It can work out much cheaper than term insurance, and it is more flexible as you can take out a plan for each child and tailor the cover amount and the term dates.
It can also be much easier to manage a regular income than a lump sum. If your family receive a significant lump sum on your death, they will have to manage this each month and make sure it lasts as long as it needs.
Conversely, family income benefit will simply be paid tax-free into their bank account every month without them having to worry about anything.
3 situations where family income benefit can be valuable
While there are lots of reasons to consider family income benefit, there are three situations where it can be particularly useful.
- Single parents
If you’re a single parent and you were to die or be diagnosed with a terminal illness, family income benefit can help secure your child’s or children’s financial future.
This is because it will provide their guardian with a regular monthly income to help cover their day-to-day expenses such as food, clothes, and school supplies.
- Families with young children
If you have young children and either you or the other parent is diagnosed with a terminal illness or dies, family income benefit can help maintain the family’s lifestyle by paying for things such as childcare and utility bills.
It can provide valuable financial support for the remaining family members should the worst happen, allowing them to focus on supporting each other at a difficult time.
- Full-time carers
Family income benefit can also be useful if you have become your loved one’s full-time carer.
Having this protection in place means that if you are no longer around, a monthly income will be available to pay for things such as private home care visits or to help towards paying the utility bills.
We can find the right protection for you
If you want to put effective and low-cost protection in place, we can help.
We work with dozens of the UK’s leading insurers and can help you to find the most appropriate protection for your needs. Get a life insurance quote online now.
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