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Family life insurance guide

Fact-checked with HomeInsurance.com

    Article Highlights

    Purchasing insurance policies for homes and cars may be common practice, but your assets may not be fully covered if your family does not have adequate life insurance. Consider your income and your contributions to your family as investments — in the event of your death, you want those investments to stay secure for your dependents. 

    By purchasing a life insurance policy for yourself and other family members, you can ensure financial security for your family in the event of your death. This article will highlight several family life insurance plans available and provide guidance on how to customize your insurance based on your family’s needs.

    What is family life insurance?

    Family life insurance offers financial coverage for you and your family in the event of a loss. Families are unique and don’t all necessarily follow a nuclear structure, but luckily you can customize your family life insurance policy to cover your particular family type. 

    There is no one policy that will work for every member of a diverse family, so it’s important to select the right kind of insurance for each person. The amount of insurance needed will depend on what the family member contributes during their lifetime and their amount of financial responsibilities. A death benefit can be used to cover funeral expenses, student debts, mortgage payments, childcare costs, lost income and more. 

    Who needs family life insurance?

    • Earning spouse – a life insurance policy can replace lost income if an earning spouse passes away. It will also help to pay off any personal debts like student loans, or family debts such as mortgages, car payments or tuition costs for children. 
    • Non-earning spouse – even for a family member who does not contribute monetarily to the family, a life insurance policy can help to keep the family secure. Childcare and home maintenance services that are provided by non-earning spouses can be expensive to replace, so a death benefit may be necessary to maintain a certain quality of life. 
    • Child – life insurance policies for children are different from adult policies because parents don’t generally depend on their childrens’ income. Although life insurance isn’t common for children, there are policies available that can help parents cover funeral costs and medical bills in the event of a child’s death. 
    • Parent or grandparent –  life insurance for senior family members may be necessary if their family depends on them for financial support. These life insurance policies can also help cover funeral expenses, personal debts or even offer an inheritance in some cases. 

    Purchasing life insurance with your spouse

    You and your spouse will need to determine whether to purchase separate or joint policies, and then decide whether term and permanent life insurance best meets your needs. 

    Term life insurance

    Term life insurance offers coverage for a predetermined amount of time and is less expensive than permanent life insurance. If the policy holder dies within that term, their beneficiaries will receive their death benefit. Due to their low cost and flexibility, these policies are often the best family life insurance plans for most families. However, term life insurance policies do not have cash value and do not earn interest. 

    Permanent life insurance

    Permanent life insurance offers coverage as long as the policyholder lives, and it guarantees a death benefit payout. Although considerably more expensive than term, permanent life policies like family whole life insurance have cash value and can gain interest over time. The differences between term and permanent life insurance are summarized in the following table.

    Term life insurancePermanent life insurance
    Coverage duration of 10-30 yearsCovered for life
    Death benefit paid if the policy holder dies within set termGuaranteed death benefit payout
    No cash valueSome types of permanent life insurance have cash value
    Low costConsiderable cost
    Policies do not earn interestSome policies earn interest

    Buying separate life insurance policies

    Most couples choose to purchase separate life insurance policies and designate each other as beneficiaries. Separate policies may require you to pay two monthly premiums, but they help insure that the surviving spouse receives the death benefit and can use the money to maintain your family’s quality of life. 

    Buying a joint life insurance policy

    Occasionally couples will choose to have a joint policy if neither spouse is dependent on the other for income. In these cases, a couple’s beneficiaries will receive the death benefit after both policyholders pass away. 

    Family life insurance for your child

    Child life insurance policies will likely be considerably smaller than that of adult family members since children do not usually contribute financially to the family. An insurance policy with a small death benefit can help offset funeral expenses or enable earning family members to take additional time away from work to mourn their loss. 

    Parents may choose to purchase whole life insurance policies for their children, or they may choose to add a child rider to their own term life insurance policies. A child rider policy is a relatively inexpensive addition that covers the children in your household, whereas a child life insurance policy is often expensive and will only cover one individual per policy. 

    Family life insurance for your parents or grandparents

    Whether or not your senior family members contribute financially, you may want to consider purchasing a life insurance policy for them. 

    Contributing parents or grandparents will need larger life insurance policies so that you can replace their contributions after they die. Even elderly family members who do not offer financial support may need life insurance if they do not have sufficient money set aside to offset funeral expenses and settle debts. 

    Burial insurance

    Funeral and burial costs can be significant, so you may want to consider purchasing final expense insurance. These permanent policies are generally easy to purchase and the death benefit can be used to settle anything to do with end-of-life expenses. 

    Family life insurance riders

    Insurance riders are simply add-on options that can offer additional security for your family. Life insurance riders apply to specific circumstances, like a family member in need of long-term care, or a sudden loss due to an accidental death. Below are some common riders that can be added to a life insurance policy:

    • Accelerated death benefit
    • Accidental death
    • Child term
    • Critical illness
    • Disability income
    • Family income benefit rider
    • Guaranteed insurability rider
    • Life insurance with LTC rider
    • Term conversion
    • Waiver of premium 

    The takeaway

    • Life insurance policies can be customized to every family type.
    • Both earning and non-earning spouses may need life insurance.
    • Child rider insurance can affordably cover multiple children.
    • Retired and senior family members may also need life insurance.

    Family life insurance can help your loved ones maintain their quality of life in the event of a loss. There are term and permanent life insurance options available, and they can be adjusted to meet individual needs. Life insurance policies offer death benefits that can be used to pay off mortgages and debts, replace income, offset childcare costs, cover funeral expenses and more. Riders also offer customization to help get the best family life insurance for your needs.

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