The Best Family Life Insurance: Shopping Guide
Family life insurance plans cover you and your loved ones, but they're not the best fit for everyone.
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When buying life insurance for family, there’s no one-size-fits-all solution. A policy that’s perfect for you may not be right for a spouse, child, parent or grandparent.
Understanding your options can help create the best family life insurance plan for your loved ones.
» MORE: How life insurance policies work
What is family life insurance?
Family life insurance is a broad term for policies that cover different members of your family. You can use these policies to pay for a range of expenses, such as funeral and burial costs, college debts, lost income or child care.
Who needs a family life insurance policy?
In general, life insurance is important for any family member whose death would place a financial burden on others. You can determine who needs life insurance by looking at the roles your family members play and their financial responsibilities.
For example, breadwinners may need life insurance to replace their income, while grandparents may want smaller policies to help cover funeral expenses. Stay-at-home parents may also need life insurance to replace the value of the services and childcare they provide at home.
A single life insurance policy typically won't cover your entire family. But you can purchase a policy for yourself or a joint policy with your spouse and then add riders or buy individual policies to provide coverage for other family members.
Why you should get family life insurance
Some family members might not need a life insurance policy. However, you should consider life insurance to meet the following basic financial needs for your family.
Replacing income
Life insurance can help your family cover daily living expenses and handle the financial loss of a wage-earner who was a primary or secondary source of income.
Paying off debt
The death benefit from a life insurance policy can help your family pay off or pay down large debts like mortgages, student loans or even credit card debt.
Covering educational expenses
If you’re a parent, life insurance can ensure future opportunities for your children such as college or private school tuition remain affordable. This can be especially important for children with special needs who might require a financial safety net as adults.
Providing for final expenses
Life insurance can provide reassurance for older family members worried about leaving behind the burden of funeral costs. It can also help with covering any estate taxes.
Best life insurance for couples
The best option for most couples is to buy separate life insurance policies for each spouse. There are two types of coverage available: term and permanent life insurance.
Term life insurance is sufficient for most families. You can set the length of a term policy to cover you until your kids are grown, your mortgage is paid off or your family no longer relies on your income.
Permanent life insurance policies, such as whole life, typically offer lifelong coverage and build cash value. However, these policies are generally more expensive than term life insurance.
Joint life insurance policies for couples
In some cases it may make sense to buy a joint life insurance policy — often called second-to-die or survivorship life insurance — that covers both you and your spouse. In general, joint life insurance policies for married couples are a type of permanent life insurance that pays out after both policyholders die.
The main purpose of these policies is to help cover costs like estate taxes or lifetime care for a child with a disability after both parties die. If only one spouse dies, the surviving spouse doesn't receive a life insurance death benefit and is responsible for paying premiums moving forward. Because of this, joint life insurance policies are best for couples who are financially independent and can cover living costs without the help of a payout.
Because premiums for joint life insurance depend on the age and medical histories of both you and your spouse, one spouse’s severe medical conditions can drive up the cost of the entire policy. However, if you’re both healthy, sharing a policy might work in your favor financially. Because insurers don’t have to pay out until both parties die, they spend more years collecting premiums. This translates to lower risk for the insurer and lower rates for you.
When you're shopping for joint insurance, compare your quotes with the cost of individual policies. For example, the average annual cost of a 20-year term life policy for a healthy 40-year-old individual buying $500,000 of coverage is $334 for men and $282 for women, according to Covr Financial Technologies. Meanwhile, a $500,000 whole life policy for the same applicant is $6,387 per year for men and $5,860 for women, on average.
» MORE: Average life insurance rates
Best life insurance policies for children
Children don’t typically need life insurance. If you want to cover unexpected costs or save for your child’s future, you’re usually better off opening a savings account.
However, life insurance policies for kids are available if you want them. In general, these policies are a form of whole life insurance, which means coverage is valid for the child’s life. Policies typically include a cash value component that builds slowly over time.
Some insurers allow you to pay off the policy after 10 or 20 years, which could allow adult children to either claim the cash value of the policy or take out loans against it. In some cases you can lock in the option to add more coverage in the future, regardless of the child’s health later in life.
Best life insurance plans for parents or grandparents
You may not need to buy coverage for older family members, especially if no one relies on them financially. However, shorter-term policies are available to provide an inheritance or cover specific costs such as funeral expenses or estate fees.
While there are options, older family members may find it tough to qualify for life insurance due to their age or health, and coverage can be expensive. The best life insurance policies for seniors may include:
Burial insurance. These are typically small whole life policies, sometimes referred to as final expense insurance, that help cover final expenses like funeral costs.
Guaranteed issue life insurance. This is a type of permanent life insurance that guarantees coverage regardless of your age or health, but it can be pricey. Usually applicants must be aged 50 to 85.
Guaranteed universal life insurance. This type of coverage is a combination of term and permanent life insurance. Because it offers lifelong coverage but builds minimal cash value, it can be cheaper than whole life policies.
Family life insurance solutions through work
If you get life insurance through work, you may be able to add supplemental life insurance for a spouse or child. But review your current plan before purchasing more coverage, as your basic policy may already cover your spouse or child for free.
There are pros and cons to buying group life insurance through work. Rates for supplemental coverage aren’t usually locked in, which means premiums can increase with age. There are also limits to how much coverage you can buy for yourself, a child or spouse. Costs vary among employers, so you should shop around to see if buying an individual policy on the open market would be cheaper.
Certain rules may also restrict your options. For example, you may need to purchase supplemental coverage for yourself before buying additional life insurance for your spouse or child. And because supplemental coverage through work is not always guaranteed, you may need to submit evidence that you’re in good health to qualify.
When buying additional coverage through work, check if your policy is portable. Group life insurance is typically tied to your employment, so if you leave your job you might not be able to take supplemental life insurance with you.
Life insurance options for military families
If you are active-duty U.S. military or National Guard, you and your family members may be eligible for a type of group life insurance called Family Servicemembers’ Group Life Insurance (FSGLI). Some military spouses are automatically enrolled in life insurance and the premiums, which increase with age, can be deducted from the service member’s pay.
For children of active-duty service members, FSGLI provides coverage at no cost until the age of 18. In some cases free coverage can continue if the dependent is a full-time student or becomes permanently or totally disabled.
Life insurance riders for your family
If you want the convenience of a single policy but need extra coverage for a spouse or child, consider adding riders to a term or permanent life insurance policy.
Life insurance riders expand policy coverage to a specific person or for a specific need. You can buy riders on the open market and sometimes through your employer. Not all insurers offer the same riders, and availability can differ from state to state.
Here are two common types of family life insurance riders:
Spouse term riders are valid for a set number of years but typically expire when the term policy they’re attached to expires, or when the spouse reaches a certain age. You may be able to convert a spouse rider to an individual policy before it expires.
Child riders cover a set period of time and pay out if the child dies during that period. These riders typically cover children from 15 days old to 25 years old. At that point, the child may be able to convert the rider to an individual life insurance policy.
Life insurance riders are not always worth it. Depending on the coverage you want and the health of your family member, it might be cheaper to buy a separate policy instead of adding a rider. And because policies usually end if the insured dies, relying on a rider can leave family members with no life insurance after a death.
» MORE: Compare life insurance quotes
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