Parents leaving children's future to chance

More than 1.6 million parents (15%) say they have never thought about how their family would survive financially if the worst happened. One in 10 expect their children to live off family savings, but with the average person putting away just £2.84 a day (£1,036 a year) according to Credit Action, this would provide short-lived protection.

Bright Grey says that for less than £20 a month (the equivalent of saving £2.84 a day for a week), a non-smoking male, aged 30 next birthday, could buy £87,000 worth of term assurance for 25 years.

As the cheapest form of life cover, term assurance only pays out during the term of the policy, after which there is no payout, so it is usually taken out for a specific purpose such as paying off a mortgage.

Term assurance is extremely cheap and its cost has been falling in recent years, due to increased competition and rising life expectancy.

Whole-of-life cover is much more expensive as it will pay out whenever you die, even if you live to to a ripe old age. It is often used in inheritance tax planning to provide beneficiaries with a lump sum to pay a potential inheritance tax bill, for funeral expenses or to provide a legacy.

In recent years, 'guaranteed acceptance over 50s' plans' - whole of life plans which the over-50s can purchase without any medical underwriting - have become popular for these purposes. These policies won't pay out during the first 1 or 2 years (the 'moratorium' period) if you die due to illness, but on accidental death, such in a car crash.

As a rule of thumb, it is recommended that you have 10 times your salary in life cover, so if you are earning £30,000 and have dependants, you should aim for cover of £300,000.

Even if you don't have dependants now, it may be advisable to buy cover while you are still young as you might have dependants in the future an life assurance becomes more expensive as you grow older.

Smokers pay roughly twice as much as non-smokers, so it may be a good idea to quit smoking before buying a policy.

If you are employed, you are likely to have life cover as an employee benefit, with many employers providing four times salary. If you have a with profit endowment policy, you should check the level of the 'sum assured'

People should establish how much life cover they have already and top up as appropriate. Anyone who has recently been made redundant will have lost valuable employee benefits, including life cover, and should try to replace it as soon as possible.

But it is worth checking with your ex-employer exactly when the cover ceases. It may be that cover continues until the policy renewal date, but it is essential to check as the insurer might not pay out on an ex-employee.

Take a look at the Defaqto guide to Life Assurance
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