What is family life insurance?

When you have a family, the right life insurance offers peace of mind that they will be looked after if you pass away. It’s a financial safety net, and can cover everyday costs like the mortgage or rent, household bills and childcare. It can also provide for future expenses such as school or university fees.

Family life insurance isn’t usually a specific type of policy, but more about choosing a policy or combination of policies that cover the needs of a household with dependents. The cover you need will depend on your circumstances and can change with life events such as getting a mortgage and having a baby.

Whether you're a young couple, a growing family, a single parent or a guardian, the goal is the same: to ensure your loved ones have financial support if you’re no longer around.

Why choose family life insurance?

Life insurance is especially important when you have children, as the financial impact on them can be overwhelming if something happens to you. Having cover in place means your family could still afford the life you’ve worked hard to build, even if you're no longer there to provide it.

Whatever your family’s needs, there’s a policy that can help protect their future. You can choose from a variety of life insurance options, each designed to suit different situations.

You may choose a term policy for a specific period, such as while your children are growing up, or a whole life policy that guarantees a payout at any time. And with optional add-ons like critical illness cover, you can further safeguard your family.

Benefits of family life insurance:

  • Helps cover mortgage payments, household bills, funeral costs, debts, education costs and more.

  • Provides financial security for your children.

  • Can be tailored to match your budget and needs.

  • Peace of mind knowing your loved ones are protected.

  • Add-ons like critical illness cover give extra protection.

What happens when the policy pays out?

When a family insurance policy pays out, where the money goes depends on the type of policy you have and who it's set up to benefit.

If you take out a joint life policy, the payout usually goes to the surviving policyholder when the first person dies. There’s no second payout when the other person dies.

However, there are other types of joint policy:

  • ‘Dual life’ policies are available that pay out when the first person dies, but life cover still stays in place for the surviving partner.

  • There are also joint policies that pay only on ‘second death’ although these tend to be used for inheritance tax planning.

With a single life policy, the payout typically goes to your estate, which can delay things a little due to probate. However, you can name a specific beneficiary or have the policy written in trust to potentially speed things up and have more control over who receives the money.

Life insurance typically pays a one-off lump sum. However, another option is to take out a ‘family income benefit’ policy. This pays a regular amount of money to your family or other chosen beneficiary.

What does family life insurance cover?

Typically covered

Family life insurance pays out if you die during the policy term, or at any point if it’s a whole life policy. As well as life cover, some policies can come with included or optional extras, including:

Terminal illness cover: Typically pays out early if you’re diagnosed with a condition that’s expected to be fatal within a certain time (e.g. 12 months).

Critical illness cover: Pays out if you are diagnosed with a serious illness covered by the policy.

Children’s cover: Some policies pay out if a child becomes seriously ill, or passes away due to accident or illness, depending on the terms and conditions.

What isn’t covered?

While family life insurance offers valuable protection, there are a few situations where a claim may not be paid:

  • Missed payments: If you stop paying your premiums, your cover could end.

  • Suicide: Many policies exclude death by suicide within the first 12 months.

  • Fraud or non-disclosure: If you aren’t honest and accurate when applying, the insurer could refuse to pay out.

  • Excluded health conditions: Some policies may include exclusions based on your medical history, for example, if you have a pre-existing condition.

  • Outliving your policy: If you survive the policy term, the cover ends and there’s no payout.

Other events may not be covered, such as death due to war or participation in extreme sports. Please see each policy’s exclusions and limitations: always read the small print to make sure you understand the terms and conditions.

How much does family life insurance cost?

Your monthly premiums will depend on factors like:

Your age: The younger you are when you take out a policy, the cheaper your premiums will usually be.

Your health: Existing health conditions typically mean premiums are higher.

Your lifestyle: Lifestyle choices such as smoking can push premiums up.

Length of term: A longer policy term often means higher premiums.

Your occupation: Some occupations make life insurance more expensive.

The ‘sum assured’: A policy that pays out £250,000 will cost more than one for £100,000.

Added benefits: Adding benefits such as critical illness cover will typically increase the premium.

Single vs joint life: A joint policy is usually cheaper than taking out two single policies (but remember that it will typically pay out just once, so might offer less protection than two separate policies).

Level or decreasing cover: Policies with a decreasing payout (often used with repayment mortgages) may be cheaper than policies where cover remains at the same level.

Reviewable or guaranteed premiums: Reviewable premiums typically start lower, but can rise when your payments are reviewed. Guaranteed premiums typically start off higher, but remain the same.

You may find your own quotes come in cheaper or more expensive than average premiums. The best way to find out how much cover would cost for you is to compare quotes from leading insurance companies.

How to keep costs down

There are ways you may be able to make family insurance more cost-effective:

Start as early as you can: The younger you are when you take out a policy, the lower your premiums are likely to be.

Choose the right level of cover: Look at your wider financial situation, such as any savings, property or investments, and choose a level of death benefit that makes up the shortfall without buying unnecessary cover.

Pick the right term: Choose the term you need and no longer.

Be healthy: Insurers typically offer lower premiums to people who maintain a healthy lifestyle. Stopping smoking, eating well and managing any chronic health conditions may trim pounds off your premiums.

Consider a joint policy: A joint policy is often cheaper than taking out two separate policies – but coverage typically ends after the first payout.

Look at different premium options: A fixed or guaranteed premium policy might be better for budgeting and long-term cost control than a reviewable premium policy where premiums can increase.

Review your cover: If your life circumstances change you might not need as much cover. You may be able to amend your policy, or cancel it and take out a cheaper one.

Shop around and compare quotes: Each insurer has its own pricing model, so it’s essential to compare quotes before committing to a policy. Also, some providers offer special deals, like free terminal illness cover. Don’t settle for the first quote you receive; it’s always worth exploring your options.

By making a few smart choices, you can reduce your premiums without compromising on the protection you need.

Things to consider

Life insurance can offer real peace of mind. But it’s important to understand how it works and what to watch out for, so you can choose the right cover with confidence:

  • Term vs whole life: Term cover may be cheaper and more suited to temporary needs (like raising children or paying off a mortgage), while whole life offers lifelong peace of mind.

  • Joint vs single policies: Joint policies are cheaper, but typically only pay out once. Two single policies can offer more protection, but cost more.

  • Premiums can increase: Depending on the policy type, your monthly cost may go up over time.

  • Missed payments matter: If you stop paying, your cover could end.

  • Not all illnesses are covered: Make sure to check the fine print if adding critical illness cover.

  • The payout isn’t automatic: If your policy isn’t written in trust, your family may need to wait for probate.

If you’re unsure which policy is right for your family, it can be helpful to speak with a financial adviser.

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Page updated on 14th November 2025, Reviewed by Richard Groom