Having a new addition in the family can be exciting, but it also means more responsibility for you and your spouse. Life insurance might not be something you have never considered before, but now that you have a newborn, it is something worth taking a shot if you want to secure the future of your kid financially.
If anything happens to you, say if you die when your kids are still young, you want to be sure that their life is not going to stagnate or they won’t end up in the streets begging for food and other basic needs. As new parents, you will need to purchase life coverage for both you and your kids.
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What Type You Need
This is one of the most crucial parts of buying a coverage policy. Each plan is different. Hence you want to make a choice based on your needs. You can either opt for a term or permanent life insurance, which provides a couple of options to choose from. Given the different options, you might have trouble deciding what you will need.
Source: fool
When to Choose Term Life Insurance
Term life insurance is, by far, a favorite for many people. But this doesn’t mean that it is best for you. If your needs don’t align with the kind of coverage life policies offer, then it is not suitable for you.
If you want a straightforward plan, then term life is worth considering. It the simplest type when compared to other permanent options. What’s more, term life products are affordable. It does not provide lifetime protection but offers coverage for up to 30 years.
As a new parent, you can visit this site to purchase a term life policy that will last as long as it will take to raise your kids. For instance, you can take out a term life policy for 25 years if you have a newborn so that by the time the policy expires, your child will have already completed college.
When to Choose Permanent Life Insurance
While permanent life insurance is not the best option, there are instances when you might want to consider it. If you own a significant estate, then you want to think of the hefty taxes it might be subjected to when you die. This is an excellent reason to purchase permanent life insurance as the proceeds can be used to pay these taxes, as opposed to leaving the financial burden to your loved ones.
Also, permanent life coverage accumulates a cash value. If this makes sense to you, and you might want to use the cash value amount later in the future or borrow against it, then permanent life insurance would be a great option.
On the other hand, a loved one could be your wife or kid who might need to depend on you for the rest of your life financially. Maybe they are disabled or, for whatever reason, they are not able to financially support themselves, then you should consider a coverage policy. This way, you have lifetime coverage, and the policy proceeds can be used to support them after you die financially.
Just make sure that the coverage is enough to support their lifestyle fully.
On the flip side, permanent life coverage can be costly when compared to term life insurance. As such, only purchase permanent life insurance only if you can afford it and if you have the above needs.
You need to understand that life insurance is not a one size fits all, each product is different and what works for your friend might not work for you. Talk to your agent and get them to explain the different policy plans available before making your purchase.
Source: forbes
Coverage for Both of You, Even Stay-at-home Parents
One of the most significant assumptions that a lot of new parents make is that life insurance is not necessary for both parents. But the truth is that both of you need coverage, and it doesn’t matter whether you are a stay-at-home parent or not. Either way, you will need to take out life insurance for both of you.
It makes more sense when buying a policy for the breadwinner so that the surviving partner can benefit from the policy proceeds once they die. Equally, the stay-at-home parent will also need coverage because they also provide child care that will need to be replaced should they die before the kid is grown enough to take care of themselves.
So it is essential to pay for such services since the surviving partner cannot provide the same.
Avoid Listing You Kid as the Beneficiary
You have found the perfect life insurance policy for you, but you haven’t chosen a beneficiary yet. As a new parent, you might be tempted to designate your young one as the beneficiary. Remember, your child is a minor, and naming them as the beneficiary to your policy is a bad idea.
If you die while they are still a minor, they will not receive the proceeds from the policy. Instead, a court order will be made to designate a temporary beneficiary, until the kid attains at least 18 years. Also, the newly assigned recipient will act as a guardian for your kid. This process might eat up a lot of money, so, avoid listing your kid as the beneficiary and instead name someone else you can trust with your child.
Source: solvay
Take-Home
Life insurance for new parents is not entirely a new thing, but you need to be aware of the fine details that make the difference. It’s important for other parents that if they haven’t it, consider buying a plan. And if you had an old one, then that makes sure to make any necessary changes if possible or get another one if the current one does not allow you to make any changes.
