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Guide to Family Insurance

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Everyone wants to make sure their family is protected should the worst happen, but what are the best family insurance options to make sure that’s the case?

If your family relies on your income to pay the bills and cover your mortgage, have you considered what would happen if you became too ill to work or even sadly passed away?

Below are a range of options that will cover your income if accident or sickness stops you working, or make sure your family is taken care of financially should you die. We’ve also included information on Family Health Insurance – so you and your loved ones can get the best medical treatment as soon as possible if any of you were to fall ill.

What Types of Family Insurance are Available?

Everyone wants to make sure their family is protected should the worst happen, but what are the best family insurance options to make sure that’s the case?

If your family relies on your income to pay the bills and cover your mortgage, have you considered what would happen if you became too ill to work or even sadly passed away?

Below are a range of options that will cover your income if accident or sickness stops you working, or make sure your family has insurance in place so they’ll be taken care of financially should you die. We’ve also included information on Family Health Insurance – so you and your loved ones can get the best medical treatment as soon as possible if any of you were to fall ill.

Income protection

Income Protection Insurance

Income Protection Insurance protects your wages so you have still got an income to pay your bills and keep a roof over your family’s head if you are unable to work due to illness or injury.


Life Insurance

Life Insurance

Life Insurance pays a lump sum to your family should you pass away, enabling them to pay off your mortgage and other debts and relieving financial stress at a very difficult time.


family income benefit

Family Income Benefit

Family Income Benefit is a form of Life Insurance which pays a monthly income to your loved ones in the event of your death rather than a lump sum.


private medical insurance

Private Health Insurance

Private Health Insurance gives you and your family access to the best medical care in case any of you fall ill, allowing you to skip any NHS waiting lists for care.


Mortgage Protection Insurance

Mortgage Protection Insurance

There are two types of Mortgage Insurance: Mortgage Life Insurance to cover the mortgage if you die and Mortgage Payment Protection to cover your monthly repayments from the risk of accident, sickness and unemployment.

Family Income Protection Insurance

If your family relies on you and your income to pay the bills, cover the rent / mortgage and meet your other living expenses, not having Income Protection could leave you exposed to the twin risks of accident and sickness.

Given that it’s designed to protect against accidents and sickness, this policy is sometimes referred to as Accident & Sickness Insurance. It’s designed to pay you a continuation of your monthly income to cover your core outgoings if you become too ill or injured to work.

The best Income Protection policies will cover you for your own specific job – so anything that medically renders you incapable of doing the daily activities required in your role. This is known as own occupation cover.

Also consider how long you want the cover to pay out in the event of a claim. The best Income Protection is long-term, meaning it will pay out until retirement if you’re so ill you can never work again. It’s also possible to get short-term policies that only pay out for a maximum of 1, 2 or 5 years per claim.

There are a number of points you’ll have to consider if you’re looking at this type of cover, all of which can effect how much Income Protection costs. This includes:

  • The deferred period
    How long you’ll need to be off work before the policy pays out
  • The type of premiums
    E.g. age banded premiums (which rise in line with age) or guaranteed premiums (fixed over time)
  • Whether you index the benefit
    This will allow your payout to keep pace with inflation over the life of your policy
  • Policy cease age
    The age your Income Protection cover will end.

With so many different options, you can see why it’s beneficial to speak with an expert adviser who knows the market and the product inside out. That way you can be sure you’ve got an Income Protection policy that ticks all the boxes for you and your family.

Life and Critical Illness Cover for Families

What is Life Insurance?

Life Insurance pays out a lump sum to your loved ones in the event of your death. Essentially, it’s an insurance for your family aimed at providing with them vital financial support at a very difficult time.

The cash can be used for any number of reasons, although typically families use Life Insurance to pay off a mortgage debt. This way, they don’t have to worry about losing the family home on top of the distress of losing you.

Decreasing Term Life Insurance is often used for this purpose, as the benefit the policy will pay out falls over time in line with your mortgage.

Of course, the money can also be put to other uses, from maintaining their standard of living to paying for your funeral or covering school or university tuition.

Where the policy is to be used to provide some kind of family protection in this manner, the alternative to Decreasing Life Insurance is Level Life Insurance, where the benefit stays fixed over the life of the policy.

This is useful if you want insurance for your family that will leave a cash lump sum in later years on top of repaying your mortgage, or if you’ve taken out an interest-only mortgage and will have to repay the principal capital you borrowed at the end of the loan term.

Decreasing Term Life Insurance is cheaper than Level Life Insurance because as you get older and the the risk of you claiming rises, the amount the insurer will pay out is falling in line with your mortgage.

michael barrow, independent protection expert at drewberry

If you’re considering Family Life Insurance, it’s important to write your Life Insurance policy into trust so the payout isn’t added to your estate and doesn’t have to go through probate, meaning your loved ones get the money faster and there are no inheritance tax implications.

Michael Barrow
Independent Protection Expert at Drewberry

Should Couples Get Joint Life Insurance?

Joint Life Insurance is available for couples, where two people are written on the same policy. While this is cheaper than having two separate Life Insurance policies (one for each half of the couple) it does have its drawbacks.

Joint Life Insurance will only ever pay out once – usually on the death of the first partner. This means that the cover ceases for the surviving partner after the first person’s death.

It may be far harder and more expensive for the surviving partner to then find Life Insurance as a single individual if they’re older and in poorer health than when they took out the Joint Life policy.

Should the worst happen and both halves of the couple tragically die at the same time, a single payout from a Life Insurance policy may not be sufficient for any surviving family.

While one payout may be enough to pay off the mortgage, dependent children may then not have any cash to live on.

As a result, many couples opt for two single Life Insurance policies to protect their families, one for each person. This generally only costs a few extra pounds per month – with the payout potentially doubled (once for each individual).

Adding Critical Illness Cover to Life Insurance

Most Life Insurance policies offer the choice to add Critical Illness Cover. This will trigger a payout not just on death but also if you’re diagnosed with an insurer-specified serious or ‘critical’ illness, with the big three claims being due to cancer, heart attacks and strokes.

Critical Illness Cover insures your family not just for the risk of death but also the risk of becoming seriously ill.

As you have a far higher risk of developing a critical illness than you do of dying, adding Critical Illness Cover to your Life Insurance will increase the premium. However, it offers an additional layer of cover and peace of mind.

Family Income Benefit

What is Family Income Benefit?

Family Income Benefit is similar to Life Insurance in that your family gets insurance in case you die. However, rather than getting the payout as one upfront cash lump sum, your loved ones will receive a continuous monthly income after your death.

This effectively replaces your lost earning capacity for a set period – these policies are often written to run until your youngest child becomes self-sufficient (often around their 21st birthday).

How Does Family Income Benefit Work?

Family Income Benefit is often used to complement Life Insurance and run alongside it.

It’s common to have a Life Insurance policy to pay a lump sum to cover your mortgage and then a Family Income Benefit to ensure your loved ones can continue to afford to live in the family home.

This combination allows for cover for your family to cover ongoing housing-related costs such as utility bills, council tax and home insurance in a mortgage-free property.

rob harvey, head of protection advice at drewberry

As with Life Insurance, it’s usually a good idea to write Family Income Benefit into trust to stop the policy being added to your estate for inheritance tax purposes.

This is something we can facilitate for you. HMRC will gross up the monthly benefit your loved ones will receive over the lifespan of a policy into one lump sum and tax that, even though your loved ones don’t receive the entire sum on the date of your death.

Rob Harvey
Head of Protection Advice at Drewberry

Family Private Health Insurance

What is Family Health Insurance?

Waiting for medical treatment as an adult can be frustrating and even costly if your illness is preventing you from working while you wait. It can also have a serious impact on your ability to take care of your family and your home.

However, if you’re the parent of a child awaiting medical treatment there is little you wouldn’t do to get them seen and treated as soon as humanly possible.

The NHS is fantastic for the service it offers with the budget constraints it has, but waiting lists are growing as the health service struggles under the weight of a growing, ageing population and a funding squeeze. That’s true for children as well as adults.

As a result, many families are looking at Private Medical Insurance in a fresh light, liking the sound of faster treatment at hospitals conveniently located for them. You may even have access to private hospitals with better paediatric care facilities than would be routinely available on the NHS.

What’s Covered by Family PMI?

Family Health Insurance has a number of benefits for parents and children. Many policies will offer cash towards a parent staying overnight in a private hospital or a nearby hotel if their child is having inpatient treatment.

Many common childhood health problems – e.g. the need for grommets due to ear problems or requiring a tonsillectomy after repeated bouts of tonsillitis – would usually be covered by Family Medical Insurance. That means your child can be treated in a private medical facility for these conditions.

Health Insurance is split into inpatient care and outpatient care. Inpatient care requires the use of a hospital bed overnight. It’s covered as standard by all Health Insurance policies.

Outpatient care is an optional extra you can add to your Health Insurance policy for an additional premium. It will cover you for diagnostic tests and scans and any other treatment that doesn’t need the use of a hospital bed.

Drew Nelson Health & Wellbeing Expert at Drewberry

Most inpatient treatment can only commence after some outpatient investigations, such as a scan.

Adding outpatient cover to your policy isn’t essential, but it can really speed up your healthcare experience instead of waiting for outpatient care on the NHS before private inpatient treatment.

Drew Nelson
Health & Wellbeing Expert at Drewberry

Mortgage Protection Insurance

Mortgage Protection Insurance covers your family’s biggest asset – your home.

It’s particularly important in families or couples where one person’s income pays the majority of the mortgage each month and, without that income, the other person’s wages wouldn’t cover the repayments.This would leave the mortgage in danger of default and your home at risk of repossession.

Do I Need Mortgage Life Insurance or Mortgage Payment Protection?

There are two types of Mortgage Protection Insurance:

Mortgage Protection Life Insurance offers insurance for your family so they have the means to repay your mortgage should you pass away. That way, they don’t have to worry about keeping their home.

Mortgage Life Insurance can either be Decreasing Term Life Cover, so the amount falls over time in line with a repayment mortgage, or Level Life Cover, which is suited for interest-only mortgages where the capital balance doesn’t fall over time.

Mortgage Payment Protection Insurance, on the other hand, will cover your monthly mortgage repayments against the risk of accident, sickness and unemployment. It will pay out for a fixed period of either 12 or 24 months.

Mortgage PPI can cover not just 100% of your mortgage repayments but also an additional 25% for other monthly household  costs, such as council tax and utility bills.

If your mortgage is your only worry if you can’t work Mortgage Payment Protection may suffice.

However, most of us will have other financial concerns outside a mortgage, which is where Income Protection could be a more comprehensive accident and sickness insurance.

Samantha Haffenden-Angear
Independent Protection Expert at Drewberry

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Common Family Insurance Questions...

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    26/09/2019
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