Don’t undervalue mums this Mother’s Day

Protection specialists LifeSearch have drawn up a three-point plan that every mother should keep in mind to make sure the family finances stay healthy.

Mothers across the country will celebrate Mother's Day on 22 March. While they receive the attention and appreciation they deserve, their value is often under-appreciated in other areas.

The findings from Legal & General's recent ‘Value of a Mum' research found that the cost of replacing the work that mums do in the home is £32,812 per year, well above the average UK annual salary. It also estimates the cost of bringing up children to age 18 is £123,552.

So, while cups of tea are made and cards given, there are also three simple steps a cautious mother can take to ensure her family are protected in the event that something were to happen to her that threatens the family's financial security.

1 - Consider a policy that pays an income

Not only can a regular income pay out more than a lump sum, but it can also be linked to the cost of school fees or home help. There are two main policies that offer a regular income:

Family Income Benefit (FIB) works the same way as a life policy but pays out a regular income from the point of claim until the end of the policy, rather than a lump sum. Potentially it can pay out more than double the amount of a lump sum and Life Cover is cheaper for women than for men (if their circumstances are similar).

Income Protection (IP) is the product that should be top of most people's list. Rather than paying out on death it replaces your salary if you suffer an illness or disability that prevents you from working. IP is also available for housewives who are either not employed or who work less than an average of 16 hours per week on a regular basis.

2 - Don't rely on state benefits

Most people dramatically overestimate the amount of state aid they and their family will receive if they are taken ill or die. In fact, a 30-year-old woman earning £35,000 per month would only be entitled to a maximum Employment and Support Allowance (which has replaced Incapacity Benefit) of £60.50 a week for the first 13 weeks. That works out at £242 per month. She may also get sick pay from work, but when that runs out there would not be much left to maintain the family lifestyle.

However for £29.64 per month (with Friends Provident) she could guarantee herself a monthly income of £1500, potentially until retirement at age 60.

3 - Take out single life cover, not joint life cover

Most people in a relationship make the mistake of assuming that they should be looking at a joint policy. It is a common mistake. Although two single life policies cost a little bit more (typically 5-10%), they pay out twice, whereas a joint policy will only ever pay out once. Also if the couple split up, they can each take their own policy with them.

Matt Morris, LifeSearch Senior Policy Adviser, says: "It is not just working women who should be thinking about protecting their finances. The value that mothers provide to the home through daily activities is massively underestimated. Unfortunately very few consumers actually realise the choices that are available to them and many either buy the wrong product or get a bad deal.

"Crucially, don't wait till something happens before you look into protecting your finances. By then it may not be possible to be accepted by an insurer and the effects on family finances can be devastating."