There are many benefits of life insurance we think it’s important for new parents to know. If you are searching for life insurance for the first time, here’s how to get a term life insurance quote to safeguard your family’s financial security.
This post is sponsored by Responsival. All opinions are mine.
- How Insurance Can Help Your Family
- Term Life Insurance vs Permanent Life Insurance
- Which Parent Should Get Life Insurance?
- How Much Insurance Should New Parents Purchase?
Becoming a parent is one of the biggest life changes people experience over their lifetime. Once your little bundle of joy arrives, you have to make a lot of changes to adapt to your new life as a parent.
One of these changes may be getting a life insurance policy for the first time. Many young people don’t feel the need to get life insurance until they have a dependent, but buying life insurance is something we highly recommend.
I have watched more than one friend lose a spouse at too young an age. When this happens, insurance benefits from life insurance policies can help the surviving spouse care for their children. But that is only possible if the family has life insurance coverage at the time of death.
Any parent (new parent, expecting parent, or a parent who doesn’t have life insurance) who is searching for life insurance for the first time, will want to keep reading. This post will help you learn how to secure the best life insurance rate possible by addressing the following:
- How life insurance can help your family
- Different types of life insurance
- Who should get life insurance
- How much life insurance should new parents purchase
If you’re ready to start exploring the world of life insurance, let’s get started!
How Insurance Can Help Your Family
Getting a term life insurance quote is a great first step for protecting your family from sad events like death. Life insurance can be an overwhelming concept when you start searching for permanent or term life insurance quotes. But by doing so you are making a long term commitment to protect your family.
The most important reason parents need life insurance is to protect your child and partner in the event of your death. While this may not be the most pleasant or uplifting topic, it is something that all parents need to consider.
We never know when terminal illness or accidental death may happen. Without the income and presence of one parent, your family will likely struggle – and I’ve seen it happen. The best way to ease the burden of losing a spouse is to take out a life insurance policy.
When you take out a life insurance policy, you designate a beneficiary: the person who will receive the payout after your death. In most cases this is your spouse or your co-parent.
In the event of your death, the beneficiary can use the insurance funds to fill in the essential gaps left by your passing. Your benefit can be used to help with childcare, pay off a mortgage, fund your child’s higher education, pay for funeral costs, and more.
Term Life Insurance vs Permanent Life Insurance
When you purchase a life insurance policy, you purchase an amount of coverage you feel you will need in the event of your death. For example, if you purchase a one million dollar policy, then your beneficiary will receive one million dollars in the event of your death.
If you have already started researching life insurance, you might know that there are two main types of life insurance: permanent and term life insurance.
Term life insurance often offers the right amount of coverage at far lower prices than permanent life insurance making it a favorite option among new parents.
What is Term Life Insurance?
Term life insurance is often preferable for new parents due solely to the lower monthly premium. When you get a term life insurance quote, you will choose a duration or “term” that the coverage will last—usually anywhere between 10 and 40 years. This means you will pay premiums for only the number of years you select.
The “term” means that your insurance policy is only active for that duration. If you die during the term, you will receive a lump sum payout.
Should you outlive your term life insurance policy, then your policy simply ends and you won’t receive a payout. Since insuring you for only a designated term is less of a financial risk to the insurance company, the monthly premium you pay is far less than permanent life insurance.
What is Permanent Life Insurance?
Permanent life insurance offers the same benefits as a term life insurance policy, with a few added benefits.
The first benefit is that the policy doesn’t expire. So, no matter what the future brings, your beneficiary will receive the payout.
Permanent life insurance policies also are able to accumulate a cash value over the course of your life and that money can be used in your lifetime. The cash value associated with a permanent life insurance policy is commonly used on late-in-life medical bills or nursing care.
Some families opt to get both types of coverage. Our family for instance, has both term and permanent insurance, and the mix changes as we (and also our children) age. You should talk with a financial professional to see what mix is right for your family.
Why We Recommend Term Insurance over Permanent Life for New Parents
- The first is due simply to the cost difference in monthly premiums. Your premium payments will be a lot less with term life insurance. Since many new parents are also paying on mortgages and cars, the lower premiums are helpful.
- The second reason is because your children grow up. The average lifespan of a term life insurance policy is 20-30 years, and by then your children will be grown. The financial burden left upon your death is lower with grown kids.
The life insurance payout is more important when your children are young because you have more expenses related to their care.
Additionally, many people pay off large debts like mortgages by the time they reach retirement age so they often have more money available, making the insurance payout less important.
Which Parent Should Get Life Insurance?
A big question that needs to be answered is, do both parents need life insurance? The simple answer is—yes, you both absolutely need life insurance. Too many people assume that since life insurance is only about the payout that only the breadwinner of the family needs the coverage.
While it is true that the main breadwinner will need their income replaced in the event of their death, the other spouse needs insurance as well. Make sure to consider the contributions of each parent. Money is not the only way parents contribute to a family.
However, it’s important to search for a life insurance policy for yourself and for your spouse or co-parent. Childcare is an important family asset, meaning stay-at-home parents also require life insurance.
If the spouse who primarily takes care of the children should pass away, then the surviving spouse will need to seek out childcare. Childcare is more expensive than ever, so it is extra important that both parents are factored into the equation when it comes to life insurance.
How Much Insurance Should New Parents Purchase?
Take time to plan your future before purchasing a life insurance policy. Having priorities for your future and your children will hep you calculate how much life insurance you need to purchase.
Your life insurance policy should be able to cover missing income, funeral costs, and any other past debts or future expenses. Since planning your financial future can be overwhelming, it is best to break down your priorities into a checklist. That’s why we’ve created one to help you get started:
- The first thing you should do to calculate how much life insurance you need is to multiply your income (or the family breadwinner’s income) by 10. That gives you a general estimate as to the amount required to replace the income for the next decade.
- Calculate any currently outstanding debts you have and add them to the total. In the event of your passing these debts will be transferred to either your spouse or your closest relative, so you need to make sure that these debts are covered.
- Estimate future expenses that will show up down the line. The best example of this is higher education. If you intend to send your child to college in the future, it is best to factor those costs into your policy as well.
- For the last step, estimate the average total amount for funeral costs and add it to the total.
Once you’ve completed those four steps, you should have a better idea of how much coverage you will need. If you are unsure if you have enough coverage for your policy, you can always contact a financial advisor for more specific advice.
Make Sure to Research and Ask Questions
If you have more questions about the benefits of life insurance, we recommend researching to find out which policy duration and coverage amount is right for you. Once you have an insurance policy, you’ll have peace of mind that your new family is financially protected in the future—no matter what happens.