Life insurance for new parents
If you're a new parent and looking for life insurance, first of all, congratulations! Read our guide to find out what cover you need and what's included.
Being a new parent is exciting but also brings new responsibilities and worries. Now that you have someone who depends on you entirely, what would happen to them if you were to die or become unable to care for them? Life insurance for new parents can relieve some of that worry since you know your loved ones will be provided for should the worst happen.
Why life insurance is important when you become a new parent
A new baby brings lots of joy into the house, but also lots of new expenses. For such a small creature, they sure need a lot of stuff!
Think about how your partner would cope with all of the expenses involved in raising your child without your income. And, if you’re a single parent, what would happen to your child if you cannot support him or her anymore.
While the thought of not being there for your child is unimaginable, a life insurance policy can at least give you the peace of mind that your child will be looked after financially.
The cost of raising a child
In 2019, national charity the Child Poverty Action Group (CAPG) found that raising a child up to the age of 18 costs £185,000 in a single parent family, and £151,000 for couples.
According to the Office for National Statistics (ONS), the average weekly household expenditure in the UK was £572.60 in the financial year ending 2018.
Other than regular household costs, such as a mortgage or rent, bills and food, you also have a lot of expenses relating specifically to your child’s needs, such as childcare, education (including uniform for school and university fees) and clothes. The ONS also found that clothing your child from birth to adulthood will cost you around £16,000, not including footwear.
Add to that pocket money, holidays and paying for their hobbies, if you’re able to provide all of those things, and it’s easy to see how you end up with the figure the CAPG came up with.
Life insurance for single parents
If you are the sole provider for your child, taking out life insurance is even more important.
Of course, paying life insurance premiums with just the one income is likely to be more difficult, but consider how your child would cope financially should something happen to you.
Life insurance for young parents
If you are young parents then the good news is that your premiums are likely to be lower. Life insurance gets more expensive with age, and so taking cover out early is a good idea.
Of course, certain elements, like whether you smoke, how much you drink and the general state of your health, will still affect the cost of your premiums. But they will all still be a factor when you’re older and your age will then play a part too.
What life insurance is best for new parents?
There are three main types of life insurance for new parents to consider:
- Level term life insurance. Level term life insurance pays out a lump sum if you die during the policy term, but the sum remains the same over the life of the policy. For this reason, it’s best suited to cover an interest-only or repayment mortgage, to meet future living costs or to provide an inheritance.
- Decreasing term. With this policy, your cover will gradually decrease over time, as will your premiums. This policy is a popular choice if you only want life insurance to cover a mortgage or debt that gradually reduces over time.
- Family income benefit (FIB). Family income benefit provides an ongoing tax-free income to your family, rather than a one-off payment. The amount paid out is predetermined in the policy details and can cover day-to-day living costs.
You can add critical illness cover to any of the above policies. This will pay out if you are diagnosed with a serious illness. You can use the money to pay for treatment, or to cover expenses if you’re unable to work because of your condition.
How much cover do you need as a new parent?
This depends on your personal circumstances. When deciding how much cover to take out, consider things like how much is left to pay on your mortgage and your family’s regular monthly household expenses.
Life insurance or life assurance?
Life insurance covers you for a fixed number of years, (usually 5, 10 or 25 years), whereas life assurance covers you for the whole of your life.
Life insurance is cheaper than life assurance, but bear in mind that if you outlive your policy, taking out a new one is likely to be very expensive, as the cost of life insurance increases as you age.
Frequently asked questions
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