Last updated: 14/06/2023 | Estimated Reading Time: 10 minutes

When you’re raising children and looking out for what’s best for them, it’s not unusual to become so focused on the present that the future is completely overlooked. It’s perfectly understandable. After all, there’s no day off when it comes to being a parent, and it can be challenging enough at times to reach the end of another hectic week, let alone take the time to stop and consider the future. 

For this reason, many parents consider looking into family life insurance policies to explore their options. However, finding the right protection for a family’s future can easily be forgotten about in the day-to-day activities of raising your kids. 

Like most things in life that matter, the future can come quickly and fast, and if you haven’t set plans to accommodate the years ahead, it can be a rude awakening when it arrives. And when it comes to how that future affects your own children, it’s vital to set the road ahead today and provide them with the best possible guidance to form their own paths in years to come. 

For the majority of parents, that first hurdle can come in the form of finding ways for their kids to gain access to higher education opportunities in the future.

In This Guide:

• Life Insurance Policies: Children and Higher Education
• What Will the Future Look Like for Your Kids?
• How Can Family Life Insurance Help With This?
• Finding the Life Insurance Policy to Accommodate These Goals
• Higher Education and Your Children's Future

Life Insurance Policies: Children and Higher Education

When exploring the wide range of options available to families in need of life insurance, it’s important to understand that not every policy is going to give you the payout or coverage you’re after. 

Using life insurance to help pay for the higher education of your children requires some time and patience to discover which policy works for your specific needs. For instance, policies of this nature tend to be a cash value policy that allows cash savings to be made over the years of the policy. 

Whole-of-life insurance policies tend to be popular for parents looking to help pay tuition fees and other cash variables in the future.

Finding the Life Insurance Policy to Accommodate These Goals

No one wants to plan for a potentially serious illness or death, but that future payout may be a huge source of support for your children in achieving their goals. Finding the right life cover for your specific needs depends on many factors, like whether a lump sum payment or monthly income works best for your family, how much cover you need, and your policy term or premiums. 

To help you find a policy that suits your needs, below are some of the potential options you can choose from.

Please Note: Not all insurance providers we work with offer all types of policies. Please do your research and compare quotes before proceeding.

Income Protection Insurance 

With an income protection insurance policy, you can receive regular pay to replace your income when the worst happens and you can no longer work. 

People in full-time employment are entitled to a specified amount of sick pay each year. But if you become injured or get diagnosed with a sudden illness for longer than your permitted amount of sick pay, you can unexpectedly lose your income for the foreseeable future. 

How Can it Help with Higher Education Payments 

If you’re a working parent with children and other dependents relying on that income for their education, this insurance policy can help to potentially provide that financial support. 

When it comes to income protection insurance, UK providers can pay out a regular sum if the policyholder is unable to work due to illness, injury, or disability. Generally speaking, this payment will continue until you return to work, retire, or pass away. 

The replacement income paid out for this insurance policy is usually a portion of your current income, sometimes up to 75%, although this may not always be the case depending on where you take out your policy. 

This coverage is paid out as a regular monthly income instead of a lump sum payment, which may be preferable to parents hoping to provide monthly payments to their children for their education costs. 

Family Income Benefit 

While most life insurance pays a lump sum to a benefactor, most family income benefit payments are made via monthly outgoings to your dependents, tax-free when a policyholder dies. 

When a family income benefit policy is taken out, you are entitled to choose the amount of monthly pay and the policy term itself. For anyone concerned about how their family might handle living expenses, household bills, and other debts, family income benefit coverage can offer these additional benefits in exchange for monthly premiums. 

Family Income Benefit and Higher Education Costs 

How can a family income benefit policy potentially help your children in higher education? First of all, it can assist beneficiaries in managing their payout due to the regular income being paid monthly instead of as a lump sum. 

And as family income benefit insurance lasts from the policyholder’s death until the policy term ends, your children can continue to finance their dreams after you’ve gone. 

How Can This Life Insurance Policy Benefit My Kids? 

When discussing a FIB policy with an insurance provider, it’s important to understand what your life insurance premiums will pay for should the unexpected happen. 

For instance, should you decide that your family income benefit policy needs to pay your children £1200 per month for the next 10 years, and you die after just four years, they’ll receive a payout of £1200 per month for the remainder of the policy (six years). 

A family income benefit policy can help your kids to cover the lost earnings your death has created, allowing them to continue their studies and pay their school fees.  

A Whole-Of-Life Insurance Policy 

This life insurance, also commonly referred to as life assurance, is intended to pay out when the policyholder passes away, no matter when that death occurs. 

Unlike a term life insurance policy, which only gives a payout within a specified period, a whole-of-life policy payout isn’t dependent on when the policy owner dies. 

Higher Education Support: Whole-Of-Life vs Term Life Insurance 

When considering the needs of your children, it helps to weigh up some of the differences between these two life insurance policy options. To assist you in deciding which life cover is best for your kids, here is a quick breakdown of each of these separate policies. 

Term Life Insurance 

• Pays out a tax-free sum of money upon your death
• This life insurance will generally be set for around 25 years 
• There’s no payout if you live past the policy term 
• There are no returns on the premiums already paid 

Whole-Of-Life Insurance

• A life insurance policy that’ll pay out when you pass away
• The benefit of being covered for your entire life 
• Premiums must continue to be paid, even if you’re very old
• Financial security for your beneficiaries no matter when you die 

Cashing Out this Kind of Life Insurance 

When you take out this kind of family life insurance policy, you may also have the option to cash it in down the road. If you decide to do this, you’ll get a payout of what’s known as the ‘surrender value’. 

Suppose you have life insurance already in place and need some supplemental income to help your children’s educational aspirations. In that case, it’s worth discussing this option with your insurance provider. While you won’t get the full policy amount, it’s an option that’s available to you in an emergency situation. 

However, in family life insurance matters, it’s always important to consider the long-term ramifications of your short-term actions. In many cases, people prefer to save up for the fees expected in higher education, instead of choosing to cash out a policy. 

Could Critical Illness Cover Help?

Unlike income protection coverage, which pays a monthly benefit, critical illness cover pays a tax-free lump sum if you become seriously ill and can no longer provide monetary support to your loved ones. 

A critical illness cover policy will also pay out in the event of death or terminal illness. However, critical illness cover will only pay out a lump sum once, and at which point the policy will end.

After this, there is no more coverage, and no opportunity to claim again for additional critical illness matters. 

What Classes as Being Seriously Ill in Critical Illness Cover? 

This can vary depending on the cover amount, the premiums paid, and your chosen insurer. Generally speaking, critical illness cover offers protection for around forty things that are deemed to be something that may cause you to be critically ill, such as strokes, heart attacks, and cancer. 

Can I get Critical Illness Cover as a Standalone Policy? 

Critical illness cover works as a standalone critical illness insurance policy. But this kind of policy pays out for one diagnosis of critical illness, but not actual death. 

Critical illness cover can also be added to some family life insurance policies, becoming what’s known as a life and critical illness cover policy.

Higher Education and Your Children's Future

Everyone, whether single parents, new parents with young families, or concerned guardians just want to do right by the children they care for. And once you’ve taken a deeper look at the ways you can support them when the unexpected occurs, through monthly payments or a single lump sum, you’ll be able to enjoy the rest of your life, confident in the knowledge that your children can achieve their dreams,  no matter what life throws their way.