What Is Family Life Insurance: Pros & Cons, Benefits & Whether You Should Buy


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ByMark Fitzpatrick
Edited byAmy Wilder
ByMark Fitzpatrick
Edited byAmy Wilder

Updated: May 22, 2024

Advertising & Editorial Disclosure

Family life insurance is a general term encompassing policies covering different family members. There’s no specific type of insurance called family life insurance. It’s a combination of multiple policies or riders.

In most cases, breadwinners buy family life insurance plans to ensure that each family member has financial protection. However, it’s not always economical. You may want to get a term life insurance policy instead.

Table of Contents

Many people purchase family life insurance policies to protect their loved ones. However, it may not always be the best option.

Key Takeaways

Family life insurance is a catch-all term and isn’t an actual type of life insurance. It refers to insuring every family member.

Family life insurance isn’t often advertised as an individual insurance product. However, some companies offer family package deals or allow clients to arrange family coverage.

Family life insurance isn’t always economical. Breadwinners may find other options to get financial protection for their loved ones.

What Is Family Life Insurance?

Family life insurance combines multiple policies for different family members. Breadwinners typically purchase family life insurance policies to protect each family member from financial disaster. Although most insurance providers don’t offer it as a standalone product, it’s possible to set up policies to insure all family members.

The table below shows the various types of life insurance policies and details their main characteristics to help you decide which is most suitable for your family’s needs.

Best Life Insurance Policy Types for Insuring Your Family
Policy Type
Description

Term Life Insurance

This type of life insurance is typically the most affordable. It offers the most coverage per premium dollar because the money isn’t split between the death benefit and cash value component. However, coverage is active only throughout the term length.

Term life insurance is an excellent option for people looking for financial protection at a reasonable cost.

Whole Life Insurance

Whole life insurance lasts for the remainder of the policyholder’s life or until a certain age. Aside from the death benefit, it includes a cash value and an investment component that may grow over time. It’s usually more expensive than term life insurance.

This is a good choice if you want permanent financial protection and save money you can access while alive.

Universal Life Insurance

Universal life insurance is also a type of permanent life insurance. Its savings component has a stronger potential for gains but is riskier than whole life insurance. The policy only pays a set amount of interest per year. It also offers flexibility in terms of premium and coverage amounts.

Universal life insurance is great for those who want permanent financial protection that’s cheaper and more flexible than whole life insurance.

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MONEYGEEK EXPERT TIP

Family life insurance policies may protect you and your loved ones against debts and final expenses, but it’s usually not optimal to insure every family member. Choosing to purchase one policy and insuring the person whose income the family depends on is more economical. Typically, this person is one or both parents.

How Does Family Life Insurance Work?

Most companies don’t offer family life insurance as an individual product. Some insurers may offer this insurance as a package deal composed of separate policies. It’s only called family life insurance because it covers each family member.

Below are some of the main features of family life insurance.

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    Coverage for the entire family

    Family life insurance policies provide coverage for all family members. That means it includes coverage for children as well as adults.

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    Expensive

    Family life insurance is often costly. That’s because you’ll pay for separate policies to insure multiple family members instead of insuring only the breadwinner.

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    Cash value

    If the family decides to purchase permanent life insurance policies, a tax-deferred cash value component will grow over time. The insurer invests the cash value in low-risk investment vehicles to appreciate at a fixed rate. The policyholder may borrow against or withdraw the cash value.

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    Dividends

    If your family life insurance includes permanent policies, your plans will have dividends. The profits for these will be returned directly to you. You can use the dividends for various purposes, including taking them as cash, paying your premiums or outstanding loans borrowed against the cash value and buying paid-up additions.

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Family life insurance can be expensive. But there’s a way to cover each family member without purchasing multiple policies. You can get additional riders, such as:

  • Child riders
  • Spouse term riders
  • Other insured riders

Insurance providers offer different types of life insurance riders. You can customize your policy by choosing riders that fit your specific needs.

How Much Does Family Life Insurance Cost?

Various factors affect the cost of life insurance, like age, health and policy type. For instance, a $500,000, 20-year term life insurance policy for a 30-year-old costs an average of $24.82 per month. Permanent life insurance usually costs more.

Spending this amount or more for each family member may lead to huge expenses. Thus, family life insurance isn’t always an economical option.

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Not all companies offer family life insurance policies. Finding the best provider may be a bit overwhelming. MoneyGeek ranked the best companies for family life insurance to help you make better-informed decisions. Based on our analysis, State Farm, Nationwide, Transamerica and Prudential offer the best life insurance for families.

Should You Purchase Family Life Insurance?

Insuring each member of the family isn’t always optimal. Purchasing multiple policies can be expensive. It may be better to insure the person whose income the family depends on most, which is often one or both parents.

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If you want to save money on insurance premiums, it’s recommended to purchase a term life insurance policy for the breadwinner of the family. You can add riders to create the best term life insurance based on your circumstances.

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Frequently Asked Questions

Finding the right life insurance policy will help protect your family from possible financial turmoil. Below are answers to some of the most commonly asked questions about family life insurance to help you better understand this coverage.

What is family life insurance?
How does family life insurance work?
How much does a family life insurance policy cost?
Should I purchase life insurance for each member of my family?

About Mark Fitzpatrick


Mark Fitzpatrick headshot

Mark Fitzpatrick has analyzed the property and casualty insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. Currently, he leads P&C insurance content production at MoneyGeek. Fitzpatrick has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.