Mums Life Insurance – Your Options
5th September 2024
This article about Mums’ Life Insurance was wonderfully written by Chris Reed from Protect Line: our chosen Financial advisors in Poole. The article answers the questions that many mums have about life insurance, such as: Why do mums need it? What sorts of life insurance are there for mums? Which life insurance is best for new parents? And many more. This article is definitely worth reading!
Mums make hundreds of decisions every day. The buck very often stops with Mum! Yet, how often do Mums get support with key decisions like, “How do I protect my family should the worst happen to myself or my partner?. Why are more parents not assisted with Mum’s life insurance?
According to Winston’s Wish (Charity for bereaved Children) over 100 children and young people are bereaved of a parent every single day in the UK. Sadly, many of these families won’t have had cover.
Today we look to explore all the questions Mums, Dads and even some older children may wonder about life insurance for mums. We have designed our helpful guide to give you the ultimate Life Insurance for Mums resource.
Why might I need life insurance for mums?
There are several reasons parents look to cover themselves. Primarily it’s usually to ensure that their kids do not suffer financially should one of their parents pass away while they’re still dependant. Life insurance pays out a lump sum of cash so that the surviving parent or guardian has choices. The things parents usually want to cover are:
- The House (either paying off the mortgage or leaving a lump sum for rent payments)
- Replace their regular income (even simple things like gas, electric and food add up fast when an income is lost. A cash injection can help them to maintain their quality of life).
- Take the financial pressure off while their family grieves
- Leave a lump sum for when the kids grow up (help them even when you’re not here)
- Pay for the funeral (stop another financial worry)
Occasionally mums will say “but i’m not the main breadwinner, so I don’t need cover”. This may be true. However, to ensure this is correct, you need to project your mind forwards. If you are the primary carer for the children right now, who would take up this role if you were gone? Would you still want your partner to work the same amount of hours, in the same job they’re in now? Often adjustments will need to be made to work to ensure the children get the right amount of support.
Just because you’re the primary carer now, it doesn’t mean you don’t need cover. You’re probably more valuable than you realise! Mums are amazing!
What sort of life insurance is there for mums?
There are a few different types of life cover you can consider:
Term Life Products:
- Level Term Life Insurance – A lump sum (that does not change) that covers you over a set period of time. It will pay out a lump sum on the event of death or a terminal illness.
- Increasing Term Life Insurance – Also known as Index Linked Term Life Insurance. A lump sum that is designed to increase, usually in line with inflation. Again, it covers you over a set period of time. It will pay out a lump sum on the event of death or a terminal illness.
- Decreasing Term Life Insurance – Cover designed to decrease usually in line with a repayment mortgage. This cover will decrease all the way to £0. It’s usually a little cheaper than level term cover.
Whole of Life Products:
- Whole of Life Insurance – Often the most expensive choice. This cover is not over any set term. It will payout a lump sum on death or diagnosis of a terminal illness no matter what age you get to. You’ll have to keep paying your premiums forever (some insurers stop premiums at a set age e.g. 90 years old).
- Over 50’s (Non Medical) Whole of Life Insurance – Much like Whole of Life, this cover is designed to pay out a lump sum on death or diagnosis of a terminal illness no matter what age you get to. However, this cover is guaranteed acceptance. There are no health questions to be asked. While healthy people can take this cover, often another type of cover works out cheaper.
These are the main types of cover that are relevant for mothers. However, each insurer brands their policies differently, so be sure to check what cover you’re actually getting.
Single vs joint life insurance
Joint cover will pay out once, usually when the first person passes away. You can opt to have 2 single policies instead. Often this is the smart choice. Your premiums will be very similar, but when one person passes away the other cover continues. Premiums are based on your health and lifestyle, so getting covered in later life can sometimes be challenge and usually a lot more expensive.
For example:
John and Jane get a joint mortgage life insurance policy for £250,000 over 20 years for £15 a month.
3 years later, sadly John passes away. Jane receives the payout and can pay off the mortgage.
Tragically Jane passes away a year later. Their 3 children inherit the house but their new guardians are left with nothing to help raise them.
John and Jane could have taken £250,000 level term life insurance each for £20 a month. If they’d chosen this option, the children would have been left £250,000 and a mortgage free home.
What life insurance is best for new parents?
Aviva offer £15,000 of completely free life insurance for new parents. Each parent can take a policy as long as it’s started before your child’s 4th birthday. This means you would have a combined £30,000 of cover. It’s important to note that this cover is only free for 12 months. After this point, Aviva will give you the option to continue with the cover, review the amount or cancel it (with no fee).
While this cover is totally free, many parents only want to deal with their life insurance cover once. A healthy 30-year-old parent can often find around £300,000 of cover for around £10 a month. With premiums at that level, it pays to shop around and find a deal you’re happy with for the long term.
Using a specialist life insurance broker can help you to find the cheapest price and review all of your options. Their service is usually free as they are paid a fee from your insurer if you choose to take up a policy. If you’re an expectant mother wanting to find the cheapest and easiest route, a fee free broker may be a sensible option.
How much cover do I need?
There is no one set amount of protection that is right for everyone. It’s important to honestly assess your current situation. There’s a combination of factors you should consider:
- Do you own your own home outright? – If not, where would you want your family to live if something were to happen to you? Are you comfortable covering say a year’s rent or would you want them to have a mortgage free home? What is the outstanding balance on your mortgage?
- Do your family rely on your salary? – If you work full or part time consider how much of your salary, your partner would need should your income stop. You may also want to consider any benefits you bring in. Single parents often also factor in what a guardian would need to help raise their child.
- Do you have any other form of protection? – You may have free “Death in Service” cover through your employer. This is typically Life Insurance that pays out while you are working. Remember, this is often not a contractual benefit so could be withdrawn at any time. You may also lose this benefit if you were to change jobs or made redundant.
- Do you pay for your children’s education? – If you pay for a private education, would you be happy for your children to change schools?
- What quality of life would you like your family to have? – Do you have a holiday once or twice a year? A car on finance? Pizza on a Friday night? If your family went down to one income, what would you want to sacrifice?
- Would you want your partner to work in the same job as they have now? – If you’re currently a stay at home parent, this is an important one. Who would you want to look after your children if you were no longer here? Your partner? If so, would they need to change their job? Maybe even give it up? If not, would they need to pay for extra childcare?
None of these questions are easy to ask. As a result, many parents put off getting covered. Many think “it won’t happen to me” or lean on the fact that life expectancy is increasing. It could be you. 1 in 29 children and have experienced the death of a parent or sibling. That’s one in every classroom.
Ask yourself these tough questions or speak to a qualified broker who will help you understand your insurance needs.
Other ways to get covered
Life Insurance isn’t the right fit for everyone. If you’re a mother on maternity or your financial situation is changing now may not be the right time for another commitment. The upside for mothers is there are alternative options open to you:
- Death In Service – If you’re part of a pension scheme at work, you may have death in service cover. You may have been asked to nominate your next of kin when you joined the scheme, often for this purpose. Typically, your family will get a multiple of your salary if you were to pass away while working for your employer. This benefit is usually not contractual, so can be withdrawn. You may also not qualify if you have to retire or leave because of ill health. If you change jobs, a new employer may not offer the same benefits.
- Group Life Cover – Group Life Cover works similarly to Death In Service. The difference is that it’s usually separate from a pension. Your employer usually sets this cover up with an insurer. As per most insurances, the premiums can change so again this benefit could be withdrawn in the future.
- Start Saving Now – Sometimes people say “…so, if I don’t die then I won’t get anything back?” and they are correct. Term Life Insurance works similarly to your car insurance. If you don’t crash your car, you receive nothing back. This can lead people to invest in an ISA or similar savings account. Calculate what would be best for you. For example, £20 x 12 months = £240 x 20 years = £4800. Theoretically over 20 years you may be better off saving. This is however reliant on you not dying during this time. If you pass away during the 20 years your family may have got a much larger amount if you had been paying for protection.
- I Already Have Savings – Most people will never have a sizeable amount of savings. If you think you’ve got enough to sustain your young family should something happen, you may be ok. However, it’s good to consider what you may want or need to use that money for in the future. Premiums are based on your health and lifestyle now. If you need to take cover later in life and your health has deteriorated, the cost could be significantly more. Worse still, you may not get cover.
- Accidental Death Cover – Usually a very cheap protection policy. These insurances cover you for a limited amount of reasons for death. There’s often an extensive list of exclusions. If you already have one of these policies, it may be worth dusting off the terms and conditions.
Applying for life insurance when you’re pregnant
Expectant mothers are unsurprisingly a curious crowd when it comes to protecting their family. Often seeking peace of mind for their family, many pregnant ladies are looking for cover. So what should you look out for?
As you know, your rates will depend on your health and lifestyle. This includes your height to weight ratio (BMI). It’s important to check with your insurer or broker what weight they need to take. Some insurers will take your pre-pregnancy rate. If they only take your weight now, you may find your price increases (also known as a “rating”). Make sure you highlight this to whoever you speak to, otherwise you could end up paying too much.
Pregnancy related health conditions such as pernicious anaemia or gestational diabetes can also put people off applying for cover. These days most insurers’ health questions cater for these conditions very well. Be sure to have your latest readings and/or medication to hand. Providing everything is under control, you’ll usually still get your cover at standard rates.
Other than that, applying for cover pregnant is much the same as any other average mother.
If you use a good broker, they may talk to you about a “Trust”. A Trust allows you to choose who you would like the Life Insurance to pay-out to (known as a Beneficiary). They’ll also ask you who you’d like to help ensure they get the money (known as a Trustee). There are a few options to choose from, again this can make it a little daunting. Bear with this process as money paid outside of a trust can take longer to get to your loved ones. They may also end up paying unnecessary inheritance tax. If you think you may need to change your trust in the future (especially if you’re expecting) make sure you highlight this to your broker.
How much does life insurance cost?
Life Insurance for Mums starts with most insurers from £5 to £6 a month… about the same as 1 magazine that the kids want. Your initial quote will depend on how long you’d like to be covered for and the amount of cover you require. Prices will increase if you smoke, have a health condition, family history of hereditary conditions, partake in high-risk leisure or occupational activities or travel to dangerous locations.
Most UK insurers offer “Guaranteed Premiums” meaning that once you take cover, your price will remain set for the duration. This usually means your cover is cheaper the younger you are.
What about Critical Illness Cover?
Life insurance for Mums is one thing, but what happens if Mum becomes critically ill?
Let’s first cover what Critical Illness is. This protection pays out a lump sum if you are diagnosed with an illness that your insurer considers being “Critical”. Unsurprisingly Cancer, Heart Attacks and Strokes are the biggest ones claimed on. However, a lot of young people claim for Multiple Sclerosis (known as MS). As a young Mum you’re much more likely to have to claim on critical illness cover than you are for life insurance.
Critical illness is more expensive than life insurance, but you can usually get your broker to give you options for both. You’ll often get life cover with your critical illness (for free) but bear in mind this will disappear if you need to claim on your critical illness cover.
Each insurer has their own list of conditions and definitions. The definitions explain how severe an illness needs to be before you could make a claim. It’s important to review this list to ensure you are comfortable with what you are purchasing. The good news for Mums is the Association of British Insurers (ABI) have a set minimum expectation for each definition. You can check your provider’s policy documents to ensure they cover what you need.
Most people are totally unaware of critical illness cover. With amazing advances in medical science, more and more of us are surviving illnesses now. While this is great news, it means we have to manage our way through a period of being sick, possibly with a lower (or no) income and possibly with more bills. Critical illness gives you and your family peace and choices. You could pay for private treatment (and recover quicker or cut the NHS queues), go on an amazing last holiday (or recovery holiday) or even just cover the bills for a few months to reduce the financial burden.
How can I apply for Life Insurance or Critical Illness Cover?
Once you know you’d like to explore mum’s life insurance, applying is the easy bit. As usual, there are a few different ways you can apply:
- Directly on one insurers’ website – not all insurers offer this service, but some do. You will only get one price from one insurer. You’ll need to ensure you answer all the questions correctly yourself. If you answer anything incorrectly, your policy may not pay out.
- Use a price comparison(aggregator) website – With this option you’ll be able to compare prices. However, you’ll need to apply directly with the insurer online. You’ll need to ensure you answer all the questions correctly yourself. If you answer anything incorrectly, your policy may not pay out.
- Use a Financial Advisor – A Financial Adviser will explore your needs and give you advice on what products you should take. Most Financial Advisers charge for their time so you may need to pay them upfront before your appointment. Some smaller Financial Advice companies also only have a small panel of insurers to choose from.
- Speak to a fee free specialist broker – Brokers specialise in comparing prices from a range of insurers. They are specialists in this topic, so can give you the benefit of their experience. Typically, brokers do not charge you any fees as they are paid a commission from the insurer should you choose to take out a policy.
If you would like to speak to a broker about your protection needs, why not check out award-winning broker Protect Line.
Protect Line have helped to insure over 250,000 UK families. The public have also voted them the Best Overall Insurance Broker and the Treating Customers Fairly Champion in the 2020 Insurance Choice awards.
Whatever peace of mind you choose; we hope you have found our guide to be useful.
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