What New Parents Need to Know About Life Insurance

[ad_1]

Which parents need to get life insurance?
All new parents need life insurance! Even in a household where one person is the primary breadwinner and one person is primarily a stay-at-home caregiver. Apart from the obvious emotional hardship, childcare is expensive, and the need to replace the contributions of either parent is substantial.

When choosing a life insurance policy for your young family, keep in mind that it’s not just the breadwinner who needs life insurance. Even if they don’t earn income, stay at home parents should have coverage too – child care provided by a stay-at-home parent would have to be paid for by the surviving parent and a life insurance payment could allow the surviving parent to take a few years off work while the family recovers.

What type of life insurance is best for new parents?
The two most common types of life insurance are term life insurance and whole life insurance.

Term life insurance provides insurance for a specific amount of time, for instance between 5, 15, or 30 years, while whole life insurance (a type of permanent life insurance) provides insurance throughout the lifespan of the insured.

Term insurance is typically at least 75% cheaper than whole life insurance. It’s usually the right choice for healthy young parents since they’ll get the right amount of coverage at an incredibly reasonable rate.

You can read more about the differences between term and whole life insurance here.

How much life insurance do new parents need?
It usually takes a middle-income family $233,000 to raise a child until the age of 17 (according to a 2017 study by the Department of Agriculture), and the cost of a four-year bachelor’s degree can exceed $400,000 according to EducationData.org. A $500,000 coverage per child is a very rough (and minimal) estimation of what you need to cover the basics.

However, every situation is different. In order to figure out your specific needs, you’ll need to know how much you currently spend on expenses such as food, rent or mortgage, childcare, healthcare, clothing, summer camp; and how you think those expenses will continue to evolve as your child gets closer to adulthood (since your life insurance policy will need to cover these expenses).

Calculating all the above will help you understand the amount it will take for your child to maintain his/her current quality of living.

Cost of life insurance for new parents
Based on the coverage you’ll need (as seen above) you can use our term life insurance calculator to get an instant quote and know in a few seconds how much your monthly premiums will cost you.

Should new parents name young children as beneficiaries of their life insurance?
When purchasing a life insurance policy, you should name someone as the beneficiary – the person or entity that will get the payout (also called death benefit) from your policy in case of death.

While a new parent’s primary concern around getting a life insurance policy is the wellbeing of their child or children, making that child the policy’s beneficiary is not the most direct way to get the money to your child because every life insurance company would hold the money until the child turns 18 or a guardian is appointed.

So, what do you need to do? In most cases, the spouse would be the primary beneficiary. If both parents were to die, however, a legal guardian for the children should be appointed as a contingent beneficiary. If you want your children to be the primary beneficiary, you can appoint a legal guardian for your kids until they turn 18.

You can also read more about life insurance beneficiaries in this guide.

What is the best time for new parents to get life insurance?
The simple answer is the earlier the better! The most important reason is that the sooner you get life insurance, the sooner your family will be protected. Also, younger and healthier people get better premium rates so there is an extra incentive to do it while you are young.

Sproutt insurance advisors are available to help you determine what kind of life insurance is best for you. and we will find the best-value plan for your lifestyle, needs, and budget.

[ad_2]