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What is Family Life Insurance?

Family life insurance isn’t a specific insurance product, but a broad phrase that describes various policies that can cover your family.

Written by Erin Gobler / June 27, 2022

Quick Bites

  • Family life insurance isn’t a single product sold by insurance companies.
  • In some cases, it refers to the ability to purchase additional coverage for family members.
  • In others, it’s a way of conveying they have something for every family member.

Family life insurance is a broad phrase to describe the various life insurance policies that can cover your entire family. Contrary to what the name implies, it doesn’t actually describe a specific insurance product.

“For example, some insurers offer a product feature that allows current customers to purchase additional coverage for a spouse or child,” says Jake Tamarkin, chief executive officer and co-founder of Everyday Life Insurance. “Others use the term ‘family life insurance’ to refer to their suite of products to convey that ‘we have something for everyone in your family.’”

Inside this article

  1. How does it work?
  2. Types of family life insurance
  3. Should you get it?
  4. FAQs

How does family life insurance work?

Family life insurance can come in several different forms. Some insurance companies offer family life insurance that’s simply a suite of policies designed to cover your entire family. That suite of products might include large term or whole life insurance policies for parents with smaller policies designed to cover only funeral expenses for other family members.

In other cases, family life insurance is created using riders on a primary policy. Some insurers offer a term rider that allows you to add life insurance for your spouse to your existing term or whole life insurance policy. Many also offer a children’s term rider, which provides a small amount of coverage for your children, often terminating when they reach a certain age.[1]

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So what’s the benefit of buying these riders rather than simply purchasing separate policies for each member of your family? In some cases, you may be able to avoid additional underwriting, meaning you can add your spouse and children regardless of their health status. Additionally, some insurers offer the option to convert these riders into their own separate policies at a later point.

Types of family life insurance

Let’s dive a bit further into the different types of family life insurance available.[2]

Term life insurance

Term life insurance is the most common type and provides death benefit coverage to the insured individual for a set amount of time, generally 10 to 30 years. If the insured dies within that term, their beneficiaries receive the death benefit.[3]

You can opt to buy separate term life policies for each family member. Term life insurance has the benefit of being the most affordable out there. Average rates start at less than $15 for a 20-year term for a healthy 25-year-old. And for children, policies would be even cheaper.[4] Depending on the ages and health status of your family, you may be able to insure your entire family for several decades for less than $100 per month.

One thing to note about term life insurance is that it only lasts as long as the policy term. Once that period ends, you’ll have to either sign up for a new policy—which tends to be more expensive because you will be older—or forgo coverage.[3]

Permanent life insurance

Unlike term life insurance which only lasts for a set number of years, permanent life insurance lasts your entire life, as long as you continue to pay the premiums.

Permanent life insurance offers a death benefit just like term life insurance does. But it also has a cash value component. That means that a portion of your premiums each month goes into an account, which can grow.

There are several different types of permanent life insurance, including whole life, universal life, and variable life. The type of policy you choose will determine how your cash value will grow. In some cases, you can end up losing money depending on the chosen investment, but generally some growth is guaranteed. [5]

Permanent life insurance policies can be an attractive choice because they never expire. They also serve as an investment vehicle (though whether they’re the best investment vehicle for most people is up for debate, and will depend on your specific circumstances).

Many families choose to create what is essentially a family life insurance plan by purchasing permanent life insurance for each member of their family. The benefit of this route is that, like term life insurance, whole life insurance allows you to lock in your policy premiums. So if you purchase a whole life policy for your young child, it will come at a very low rate that your child can enjoy their entire life.

That being said, the whole life policy you purchase for your child is likely to have a relatively low death benefit and provide lower investment returns than most alternatives.[6]

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Term vs. Whole Life Insurance

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Life insurance riders

A rider is an optional coverage that you can add to an existing policy. When you purchase family life insurance using riders, you aren’t actually buying separate policies. Instead, you’re buying coverage for one member of the family and then using riders to provide coverage for the rest.[7]

A life insurance way is a popular way to purchase life insurance coverage for children since they rarely need their own standalone policy. Depending on your insurance company, you may be able to purchase a rider for just a few dollars per month.[1]

Should you get family life insurance?

You should purchase life insurance for anyone in your family whose death would result in a financial burden. The most obvious example of this is a family member who earns the income that helps to pay the family’s bills.

However, it also includes stay-at-home parents. While they may not earn an income, they play an important role in the family and it could be a huge financial burden filling their shoes. For example, if one spouse stays home with the children and that spouse passes away, the other spouse would likely have to pay for childcare expenses. The added cost would depend on where you live and the number of children you have, but most families pay more than $10,000 per year for childcare.[8]

There’s a bit more uncertainty when answering the question of whether you need life insurance for your children. If you wouldn’t be able to afford the cost of a funeral out of pocket, it may be worth purchasing a rider or small-term policy. However, anything larger than that is likely unnecessary for children.

“Children are generally very unlikely to die before their parents,” Tamarkin says. “And while some insurers market whole life child policies as a way to establish a financial asset for the child to receive when they grow up or even as a way to save for college, if you do the math you are likely to find that it is a vastly better deal to open a custodial investment account or a 529 college savings plan for the child.”

Can You Have More Than one Life Insurance Policy?

Can You Have More Than one Life Insurance Policy?

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While Tamarkin doesn’t generally recommend family life insurance—especially coverage for children—he does provide one notable exception: “If your loved one is facing a heightened risk of dying and the add-on feature doesn’t require any additional underwriting or your attestation as to the health of your loved one,” that’s the time to buy.

One of the major benefits of a family life insurance policy is you can find a policy for your child that can automatically convert to a permanent life insurance policy.[1] If you have a child with preexisting conditions who may struggle to qualify for coverage later on, family life insurance may be worth considering.

FAQs

Who needs family life insurance?

You should purchase life insurance for anyone in your family whose death would create a financial burden, either because of the loss of income or the expenses created by their death.

How much does life insurance cost?

The cost of family life insurance depends on many factors, including whether you choose term or permanent life insurance, the number of people added to your policy and the amount of coverage you buy.

What does family life insurance cover?

Family life insurance would be used to cover any financial burden created by a family member’s death. In the case of a parent or another provider, family life insurance could help replace their income and cover household expenses. For a child, family life insurance could help to cover funeral costs and other end-of-life expenses.

Article Sources
  1. “Family life insurance — secure your family’s future.” State Farm. https://www.statefarm.com/insurance/life/resources/why-buy-life-insurance.
  2. “Life Insurance for Families.” Fidelity Life. https://fidelitylife.com/learn-and-plan/learning-center/who-needs-life-insurance/life-insurance-for-families/.
  3. “How term life insurance works: The basics.” Guardian Life. https://www.guardianlife.com/life-insurance/how-term-life-works.
  4. “Term life insurance rates: Average costs for policies lasting 10, 20, and 30 years.” Policygenius. https://www.policygenius.com/life-insurance/term-life-insurance-rates/.
  5. “Permanent life insurance.” Fidelity Life. https://fidelitylife.com/learn-and-plan/learning-center/types-of-life-insurance/permanent-life-insurance/.
  6. “Life Insurance for Children.” Aflac. https://www.aflac.com/resources/life-insurance/life-insurance-for-children.aspx
  7. “What Are Life Insurance Policy Riders?” Farmers Insurance. https://www.farmers.com/learn/insurance-questions/what-are-life-insurance-policy-riders.
  8. “This is how much child care costs in 2021.” Care.com. https://www.care.com/c/how-much-does-child-care-cost/

About the Author

Erin Gobler

Erin Gobler

Erin is a personal finance expert and journalist who has been writing online for nearly a decade. Erin’s work has appeared in major financial publications, including Fox Business, Time, Credit Karma, and more.

Full bio

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