Protecting your family
As a parent, you want to provide the best for your children and plan for their future.
We all know that raising children is expensive. In 2011 the average cost of raising a child was £133,848 and in 2013 this had increased by 15% to £154,414. This means the average cost of raising a child up to the age of 18 is £165 per week.*
How would you put a value on a parent? The reply would probably be – no amount is big enough. When considering levels of cover for life assurance policies, often the main basis for calculation is income. However, in addition, parents carry out unpaid domestic work which is not taken into account, for example spending time with their children, cooking and preparing meals, washing/ironing, cleaning, driving to activities and numerous other household tasks. The charts below show the results of research into the real value of a parent.
MUM DAD NEW/EXPECTANT MUMS
Hours/week 71 hours 53.5 hours 72.5 hours
Cost/year £31,627 £23,971 £32,655
Perceived value of the parent:
PERCEIVED ACTUAL DIFFERENCE
Mum £15,548 £31,627 £16,079
Dad £15,496 £23,971 £8,475
Source: Legal & General “Value of a Parent” 2013 research
Parents significantly underestimate or overlook the cost of unpaid work. Most families think that protection for the parent earning the most money is the main priority. As the figures above show, it is important to consider both parents’ contributions. Although 73% of parents say their top financial priority is to ensure that their children are looked after if they are unable to do so themselves - due to death or illness - over half of those households surveyed (51%) are living without life assurance.** Sadly it is a grim reality that 1 in 20 children lose a parent before they finish full time education.***
You can provide security for your family by taking out life assurance cover. Families affected by the tragedy of death or illness have enough worries without financial concerns. Often cost is given as a reason not to take out life assurance, but a joint level term life assurance policy for a sum assured of £150,000, payable on first death, could cost as little as £18.10 per month.**** Such a policy could be used to protect the family while they are growing up.
We often consider a family income benefit (FIB) policy with our clients; this type of policy could provide a monthly income in the event of a parent dying or becoming seriously ill. This is sometimes preferable to a lump sum payment and, in some circumstances, can be more affordable.
Maintenance payments protection
FIB can also be used for maintenance payment protection. Have you considered how you would manage if maintenance payments for your children ceased? If the parent making the maintenance payment suddenly died or became seriously ill, payments that the family rely upon could stop. The FIB policy is often the most effective way of providing cover for child maintenance payment protection and can also be used to cover spousal maintenance payment protection.
Our team of independent financial advisers can assess your life assurance requirements. As part of the process we recommend that you write a will, if you haven’t already done so. Less than 31% of parents have a will and for new or expectant mums this falls to just 16%. Of the parents who don’t have a will, 52% said the reason was simply that they hadn’t got around to it.
*Source Legal & General “Value of a Parent” 2013 research.
**Source Legal & General “Nearest to Dearest” 2014 research.
*** Telegraph March 2015.
****Zurich Level Term Assurance quotation male and female, joint life, first death, non-smokers, term 25 years.