Is your family covered? How mums across the UK are critically underinsured

Have you protected your family if the worst happens? Find out how mums across the UK are critically underinsured – and what insurance policies you should consider.

As women, we hear the prefix ‘under’ a lot. Despite big leaps forward in the last few decades, we still hear about women being undervalued, underpaid, underappreciated, underrepresented, and so the list goes on.

But there’s one ‘under’ word that we don’t hear so often and the ugly truth is, it’s a word we need to confront: underinsured.

Mums across the UK are critically underinsured

Mums across the UK are critically underinsured. Research from Scottish Widows shows that in the UK, 60% of women with dependent children have absolutely no life cover, 75% don’t have the protection of a will or guardianship arrangement in place, and 87% don’t have a critical illness policy.

Simply put, these numbers mean that most mums across the country don’t have adequate protection for their families if the worst were to happen.

With 24% of mothers claiming they have not taken out life insurance because they don’t think that they need it, are stay-at-home mums undervaluing themselves and their contribution to their families?

How can you protect your family if the worst happens?

It’s estimated by SunLife that stay-at-home mums do almost £30,000 of unpaid work a year. Add this to whatever your bringing in from freelance work and it’s a big contribution to the household’s finances.

Arguably then, the question a lot of women should be asking themselves is “could my family afford to cover my contribution if I wasn’t around?” If not, it’s important to get yourself covered.

If you’ve never thought about insurance before, here are the different types of insurance all self-employed mums should know about.

What type of insurance do you need in the event of death?

Here are two types of insurance that will protect your family in the event of your death.

1) Life insurance

Life insurance is an agreement where, in exchange for premium payments, the insurance company provides a lump-sum payment, known as a ‘death-benefit’ to beneficiaries upon your death.

This means you can pay off a mortgage, settle debts, or provide a lump-sum to your dependents. This type of cover is, on average, around £8 a month (but this will likely be higher if you are a smoker.)

2) Family income benefit

With family income benefit, in the event of your death your insurance company will pay out monthly tax-free income over a specified term.

This is different from life insurance as it’s designed to meet the beneficiaries continued cost of living rather than paying out a lump-sum. To decide how much cover you want, you need to decide how much your family would need monthly in the event of your death and how long you want them covered for.

This insurance can start from as little as £5 a month but will depend on your age, how much monthly income you want, and if you smoke/have health issues.

What insurance do you need if you are unable to work or perform your role at home?

Here are the insurance plans you may consider if you are unable to work or perform your role at home.

1) Critical illness cover

You can buy critical illness cover as a standalone plan or in combination with your life insurance plan. This means that you are covered in the case of a sudden illness and you’ll receive a tax-free, one-off payment. So you can use the money to adapt a house, settle debts, provide an income, or whatever you choose.

It’s important to remember that, if incorporated with life insurance, there is normally only one pay-out. So if you claim for a critical illness, you would not receive a further payout on death.

The cost of critical illness cover depends on whether you buy it with life insurance or on its own, and upon the benefits chosen, your age, and your medical history. For life and critical insurance cover of £100,000 for a 30-year old non-smoker, the average cost will be about £25 a month.

2) Income protection insurance

Income protection insurance provides you with a replacement income if you have a long-term disability or illness. This is used to cover continued costs of living rather than providing a one-off payment, and is especially important for self-employed mums who will not receive sick pay from an employer and state benefits are limited.

The insurance varies depending on the provider but tends to be between 50-60% of your gross income (Conen, Mike. Financial Services, Regulation and Ethics 2016/2017. Institute of Financial Services).

Many companies will provide benefits for people who are stay-at-home mums or will provide benefits to cover the jobs needed in the home. The costs for Income Protection are dependent on basis of age, health, occupation and the amount of income you want to protect; they can start at as little as £10 a month.

Give you and your family peace of mind

Insurance doesn’t need to be costly or complicated to set up, and the peace of mind you get knowing that your family is covered if the worst were to happen, is always worth it. Let’s turn the tide on underinsured families and help women understand their value.

Zoe Beels works for Multiply, an app that gives self-employed people free, independent financial advice. The app is expected to launch in late September, and you can sign-up for early access here.

Photo by Derek Thomson