The Best Family Life Insurance: Shopping Guide - NerdWallet (2024)

When buying life insurance for your family, there’s no one-size-fits-all solution. A policy that’s perfect for you may not be right for your spouse, child, parent or grandparent.

Understanding your options can help you create the best family life insurance plan for your loved ones.

What is family life insurance?

Family life insurance is the catchall 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. In general, life insurance is important for anyone 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 long-term financial responsibilities. For example, breadwinners may need life insurance to replace their income if they die, while grandparents may need smaller policies to help their family cover funeral expenses.

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 typically 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, 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 major costs, such as 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 death benefit and is responsible for 100% of the premiums moving forward. Therefore, these policies are suitable only for couples who are financially independent and can cover living costs without the help of a payout.

Premiums depend on the age and medical histories of both you and your spouse. Therefore, severe medical conditions of one spouse can drive up the cost of the entire policy. On the flip side, if you’re both healthy, sharing a policy might work in your favor. Insurers don’t have to pay out survivorship benefits until both parties die, which means they spend more years collecting premiums. This translates to lower risk for the insurer and lower rates for you.

The average annual cost of a 20-year term life policy for a healthy 40-year-old buying $500,000 of coverage is $309, according to Quotacy, a life insurance brokerage. To compare, a $500,000 whole life policy for the same applicant is $6,483 per year, on average. And a second-to-die survivorship policy, covering two people, is $2,164 per year.

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 generally better off opening a savings account.

However, life insurance policies for kids are available if you want coverage. 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, leaving the death benefit intact for the child’s lifetime.

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. You can typically increase coverage only at predetermined ages, yearly intervals or approved events, such as when the child marries or becomes a parent.

On average, a $25,000 whole life policy for a newborn costs $184 per year for females and $211 for males, according to Quotacy.

Best life insurance plans for parents or grandparents

You may not need to buy coverage for older members of your family, especially if no one relies on them financially. However, policies are available for those who want to provide an inheritance or cover specific costs such as funeral expenses or estate fees.

Older family members may find it tough to qualify for life insurance due to their age or health. As a result, coverage can be expensive. However, there are options for older applicants. The best life insurance policies for seniors may include:

Family life insurance solutions through work

If you get coverage 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 are rarely locked in, which means your premiums can increase as you age. There are limits to how much coverage you can buy for yourself, a child or spouse, and costs vary among employers. Shop around: You might be able to get more coverage for less on the open market.

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. Supplemental coverage through work is not always guaranteed, which means you may need to submit evidence that you’re in good health to qualify for additional coverage.

When buying additional coverage through work, check if you can take the policy with you. Group life insurance is typically tied to your employment. In short, if you leave your job you might lose coverage.

Life insurance riders for your family

If you want the convenience of a single policy but need extra coverage for your spouse or child, consider adding riders to your term or permanent life insurance policy.

Life insurance riders expand the coverage of your policy by covering a specific person or need. You can buy riders on the open market or through your employer if your company allows. Not all insurers offer the same riders, and availability can differ among states.

Life insurance riders are not always worth it. Depending on the amount of coverage you want, you might be better off buying a separate policy to cover a family member instead of adding a rider. This is because riders are typically canceled if the policyholder dies, leaving the family member with no insurance.