Family life insurance provides a financial safety net for every member of your household. It can be tricky to know what you need, but the good news is plans that provide life insurance for families can be tailored to meet you and your loved ones’ needs. Our guide breaks down what family life insurance is, your options for buying policies, and whether or not it’s right for you. There are many important things you need to know about your life insurance policy. One of the most important is the life insurance premiums you’ll need to pay. But what exactly is a premium in life insurance?
What Is Family Life Insurance?
Life insurance for families refers to policies that cover multiple family members. Since the death of any family member can leave survivors with the financial burden of paying for bills they left behind, family life insurance is often purchased by parents, adult children, and even siblings.
What Does Family Life Insurance Cover?
Like policies for individuals, family life insurance is used to cover funeral expenses, burial and cremation costs, and outstanding medical costs. It can also be used to pay for expenses that younger family members who pass away often leave behind, such as college tuition, mortgages, and auto loans.
Family Life Insurance Options
Life insurance for families is usually a package of products from a single company to cover each individual member of the household, including kids. Sometimes only one large permanent or long-term policy is purchased as a way to cover everyone. Whatever the size of your family, you have a few different options for buying a plan that covers every member.
Buy separate policies
Buying separate policies for parents, children, and even grandparents ensures that if someone passes away, those left behind will receive some form of financial support. That’s why buying separate coverage is the most popular form of family life insurance.
For example, in a family of four, a family life insurance plan might include a large whole life insurance policy for the parent who earns the most income, a smaller whole life policy for their spouse, and term policies for each child. This type of plan keeps the cost of insurance premiums relatively low but provides death benefits that will support the surviving family members so they can pay off the deceased’s debts and continue living their current lifestyle.
Buy a joint policy
Separate policies are usually advised for couples. Even for couples with a partner who doesn’t earn an income, the death of either spouse would likely present a financial burden to the other, which is why many spouses choose to buy separate policies.
However, partners who aren’t able to purchase two plans due to financial limitations or ineligibility may benefit from a joint policy. This type of life insurance for families of two can be a great tool for spouses who want to be able to pay off debts their husband or wife leaves behind in the event of their death.
There are two main options for joint life insurance policies for couples:
- First-to-die life insurance: In this type of policy, the death benefit is paid to the surviving husband or wife after their partner passes away. This is usually the best option for couples with one spouse who can’t qualify for an affordable individual policy.
- Survivorship life insurance (aka second-to-die or last-to-die): This is usually a form of permanent life insurance. The death benefit is paid when both partners die, usually with the intent of providing surviving children with financial support. Survivorship policies are only a suitable option for couples that are financially independent without a death benefit.
Add a rider to a term or whole life insurance policy
Insurance companies offer different riders to their policyholders that are helpful to parents and married partners. For instance, an accelerated death benefit rider would be useful in the case of a spouse’s terminal illness diagnosis, such as cancer or COPD. This rider allows spouses early access to the ill partner’s death benefit so the funds could be applied to their care. Any leftover money after they pass away could still be put toward funeral costs, outstanding medical bills, loan accounts, and other final expenses.
Life insurance companies offer different rider options on their policies, including those specifically for children. If you’re interested in buying family life insurance, ask your provider what makes the most sense for your situation.
Life Insurance Policies for Children
Most people think of life insurance as only being for adults. However, parents often buy policies for their children. If tragedy strikes and their child passes away, a life insurance policy will help cover their funeral costs, medical bills, and other final expenses that are difficult for parents to pay without a financial support net. Life insurance options for families with children include:
- Term life insurance for children: This is a popular option for parents in large part because this type of coverage is less expensive than whole life. It’s also not permanent, so it offers some financial security to parents until their children are old enough to purchase their own life insurance policies.
- Whole life insurance for children: Whole life policies are available for kids of all ages. Some companies even offer coverage for infants. However, the premiums are expensive. It’s usually better to find another form of coverage for your child unless they’re at risk of developing a health condition that will make it difficult for them to buy a policy as an adult.
- Convertible life insurance for children: Some parents buy convertible life insurance policies for their children, usually in the form of term life insurance. Once the policy expires, their child has the option of converting it into a new term or whole life policy they can maintain as an adult. Convertible life insurance is especially helpful for a child that develops a health condition that might make it difficult to obtain life insurance as an adult.
Again, it may be possible to add a rider to a parent’s policy that provides coverage for the kids, which is much cheaper than buying an individual policy. It’s a good idea to talk to your financial advisor about how big of a policy, if any, you need for your child and then speak with your insurance agent about available options.
Life Insurance Policies for Parents or Grandparents
It’s wise for adult children to buy life insurance for parents and grandparents if a policy isn’t already in place and they’ll be responsible for their final expenses. However, it often doesn’t make sense to buy whole or even term life insurance. These policies are expensive for seniors, and because older adults no longer have families relying on their income, the coverage amounts are often more than they need.
Burial insurance for seniors, also called final expense insurance or funeral insurance, is a great way to add your parents or grandparents to your family life insurance plan. These policies are usually available in coverage amounts between $5,000 and $20,000, meaning you won’t have to pay high premiums for a death benefit larger than you need. Many final expense insurance companies don’t require a medical exam, so even seniors who are too old or too ill to qualify for affordable plans for other types of life insurance qualify. Purchasing a Lincoln Heritage Funeral Advantage policy will give you and your family peace of mind that you’ll have a financial safety net after your loved one passes on.
Do I Need Family Life Insurance?
Family life insurance is a great way to ensure you have financial support to pay your loved ones’ expenses in the event of a tragedy. There is no one-size-fits-all approach to life insurance for families, so talk to your life insurance agent about the policies that will best protect your family’s finances if you, your spouse, or another family pass away.