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The key stages of life Life insurance as a mum

Being a mum is hard. Sleepless nights, constant errands, always putting another's needs before your own. So it's no wonder that our brains are often in overdrive.

However, there is one important thought that is often over shadowed by these day to day deliberations What would happen if you died?

A solemn thought, yes. But nonetheless, something which needs to be addressed is the financial security of your family if the worst were to happen to you.

Having in place adequate life insurance can ensure that if you were no longer around then your family would be provided with the financial support to maintain their existing lifestyle and stay in the family home.

Throughout life there are certain key events which emphasize the need for life insurance. But before looking into these various situations, let's establish the types of life insurance available.

Types of life insurance:

  • Level term life insurance - Monthly premium payments are made and if you die within the term of the policy, a lump sum pay out for a predetermined amount is paid to your loved ones
  • Decreasing term life insurance - Monthly premium payments are made and if you die within the term of your policy, a lump sum pay out is made, although unlike level term, the value of this pay out decreases over time
  • Family income benefit - Monthly premium payments are made and upon your death, a tax-free monthly income is provided to your loved ones for a set period of time to mimic a regular salary or other income
  • Whole of life - Monthly premium payments are made for the rest of your life and when you die a guaranteed lump sum pay out is made to your loved ones
  • Over 50s plan - Similar to a whole of life insurance plan, premiums are paid for the rest of your life (or usually until the age of 90) and a pay out is made when you die. However, no medical information is required to be accepted for this type of policy.

Now let's take a look at the key milestones in a mum's life which highlight the importance of having life insurance.

Buying a home

A mortgage is arguably the largest debt you will ever have with the average UK house price being over £220,000.

For this reason, it is important to protect such a huge asset with life insurance in-case you die before the balance of the mortgage has been paid.

If you were to die before the mortgage has been paid, your partner would be required to make the mortgage repayments alone to ensure the house is not repossessed.

Should this happen, it would mean the property would not provide an inheritance and if you and your family were living in the property when you died, it could mean that they would have to leave the family home and find elsewhere to reside, causing additional stress at an already emotional time.

With a repayment mortgage, decreasing term life insurance can be put in place so that the pay out sum of the policy decreases over time to reflect the remaining balance of the mortgage.

This will mean that if you were to die, the mortgage would be repaid and your family could focus their finances and emotional strength on continuing their existing lifestyle in the family home.

Getting married

When getting married, with regards to life insurance, the main focus tends to fall on protecting your partner if you were to die.

At this stage in life, many people tend to steer towards a joint life policy after all, you have just vowed to join everything else in your lives, so why not life insurance?

Whilst a joint life insurance policy is cheaper than two single policies, it will only pay out once.

This means that if one of you were to die, the remaining partner would receive a lump sum pay out but they would then be left uninsured.

This would put them at risk or require them to take out a new life insurance policy at an older age which is highly likely to result in increased premiums.

Additionally, if you have children but only take out a joint life insurance policy and were to tragically both die, this would only result in one pay out.

This pay out amount may not equate to enough to cover the financial loss of two incomes, leaving your children at risk of having to leave the family home or having to significantly change their lifestyle.

Having a child

Having your first child is daunting for a whole host of reasons Ð But ultimately it boils down to the fear that another being is totally reliant upon you!

If you were no longer around, not only would there be the emotional void of losing a parent but also the financial instability of the income you once brought into the household.

School fees, food, clothes and hobbies are just some of the day to day living costs which need to be covered regardless of your mortality.

Even with the income of your partner, it is likely the family household income would struggle to stretch to meet these costs without you present.

Family income benefit can allow you to put in place provisions so that if you were to die, your loved ones would still receive a regular income to allow them to continue enjoying their existing lifestyle.

Extending the family further

Many families will put in place life insurance after having their first child.

As their family extends further, it is highly likely that this initial cover amount is inadequate to cover multiple children.

Fortunately, having additional children allows you to invoke a special events option on an existing life insurance policy.

This option can be invoked following a number of significant events such as having another child and buying a larger house.

It involves increasing the amount of cover you have in place without the need for additional underwriting.

This is usually cheaper than taking out an additional policy to cover the newly required amount of cover, especially if you have aged or have experienced any medical conditions since the original policy was arranged.

Being a stay-at-home parent

Regardless of the stage of life, it is easy to conclude that there is no need for you to have life insurance cover if you are a stay-at-home mum. After all, you don't bring any tangible income into the home.

Surprisingly this isn't the case!

As a stay-at-home mum you carry out a large number of tasks that without you present, would otherwise require a large percentage of your household budget.

For example, if you were to die, it is likely the need for additional childcare would arise. This would either require your partner to reduce their working hours to care for the children or paying for costly childcare. Both of which will tighten the family budget.

To avoid this shortfall, insuring a stay at home parent can ensure that if you were to die, the remaining parent can continue to work as necessary, additional childcare (and other costs) will be covered and the family lifestyle can remain as undisrupted as possible.

Dependant on the desired method of money management, the most suited life insurance policy types for this situation tend to be level term life insurance and family income benefit.

Level term life insurance will allow the family to know exactly how much they are entitled to overall and can enjoy such luxuries as holidays etc. due to the lump sum pay out. However, this does require a large amount of money management to avoid financial disarray in the future once the lump sum has been spent.

Whereas, family income benefit will provide financial stability by mimicking the income of a salary and allow budgeting to continue as it was before the death of the parent.

Providing an inheritance

Once your children are financially stable, it is unlikely you need life insurance cover to help maintain their day to day lifestyle if the worst were to happen to you.

However, unfortunately any outstanding debts and the cost of your funeral will become the responsibility of your children (or partner).

Taking out a life insurance policy can allow you to cover the remainder of this debt (potentially through decreasing life insurance) and the cost of your funeral (potentially via level term cover) to avoid leaving your loved ones with the burden.

Equally, it is likely that at this stage in life you will begin thinking about the inheritance you can provide your loved ones if you were to die.

Taking out level term life insurance will provide your loved ones with a lump sum pay out upon your death which can then be enjoyed in whichever way they wish.

Depending on your age and health, an over 50s plan, which does not require any medical questions and guarantees acceptance (50-85), may be more appropriate.

Life insurance for mums summary

As you can see there are various stages within motherhood when the prevalence of life insurance is more significant than others.

Regardless of which stage you are at, it is important to ask yourself the following two questions;

  • What am I looking to protect?
  • What pay out type would benefit my loved ones the most? (What type of cover is most suitable?)

This will help you to determine the best type of cover for you and the amount required.

When arranging life insurance cover, it is always beneficial to contact an independent life insurance broker who will not only discuss the various options available to you but will also compare quotes on your behalf.

Comparing multiple quotes enables you to find the most cost-effective policy to suit your unique needs.

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