Life becomes more fragile when children are involved, so purchasing a life insurance policy is necessary. But many new parents wonder if they can buy a life insurance policy for a family member or if they can get one while they’re pregnant.
When an insured person dies, life insurance benefits a beneficiary, such as a spouse or a co-parent. When you get life insurance, you have the option of selecting a beneficiary.
The funds may be used to maintain your family while away, such as paying the mortgage and providing for your child’s schooling. We’ll detail why all parents should have a life insurance policy and the suggested amount of coverage to purchase.
What life insurance policy is best for new parents?
Term life and permanent life are the two primary forms of life insurance.
Term Life Insurance
Most new families will just need term life insurance. Because it is inexpensive, people who need coverage may purchase enough to provide a solid safety net. You should buy a term that will cover the years while you are accumulating funds, paying off debts, and dealing with the expenses of raising a kid.
You won’t need life insurance after the term if your children are financially independent, your mortgage and other obligations are paid off, and you’ve saved enough for your spouse to retire comfortably and have abundance in life.
If you have a long-term financial reliance, such as a disabled child, permanent life insurance might help. If you are affluent, permanent life insurance may also be used as an estate-planning strategy. If federal or state estate taxes are anticipated, your heirs might use the settlement to pay them.
Term life insurance is only meant to be used for a particular time. It’s the most cost-effective kind of life insurance since it allows you to get a large amount of coverage at a low cost. A term life insurance policy is purchased to cover a specific time period, such as 10, 20, or 30 years.
Permanent Life Insurance
Life insurance that is permanent covers you for the rest of your life. Whether you die next year or 50 years from now, it will pay off. Permanent life insurance comes in several forms, including whole life, universal life, variable universal life, and indexed universal life.
Most term life insurance contracts may be converted to permanent life insurance if you think you might need it but can’t afford it. A term life insurance may be purchased, and sections of it converted to permanent coverage over time.
Is there a need for life insurance for both parents?
Keep in mind that life insurance isn’t only for the breadwinner when choosing the best coverage for your young family. Even if they don’t produce an income, stay-at-home parents should be covered.
A stay-at-home parent offers vital services to the surviving parent such as child care which the surviving parent would have to pay to replace. A life insurance payment might also allow the family’s remaining breadwinner to take a few years off while recovering.
What is the appropriate amount of life insurance to purchase?
Parenthood can be expensive; aside from investing in your health, consider your family’s financial demands if you weren’t there to support them when determining how much life insurance to purchase.
To determine an appropriate amount, multiply your annual income by the number of years you want a life insurance policy to replace. Add in your other financial responsibilities, such as loans and your children’s education expenses.
Include the cost of replacing any services you supply, and then subtract your existing savings and life insurance coverage.
How to make my beneficiary selections?
When you get a life insurance policy, you choose a beneficiary, such as your spouse, who will receive the proceeds. If you want the money to go to your young children, don’t give them a name. If the beneficiary is a minor at the time of your death, the life insurance company will not be able to pay the benefit until the court has appointed a guardian.
Alternatively, you might create a life insurance trust and identify it as the beneficiary to hold money and property for your children. You name a trustee to operate the trust according to your wishes, such as your spouse or another adult.
A lawyer can help you establish a trust, and a life insurance company can advise you on how to write the beneficiary designation.
When is the best time to get life insurance as new parents?
There’s no better time to get life insurance than right now. Each year you put off filing your application, your premiums increase by 4 to 10%. New medical diagnoses may also lead to an increase in cost. If you already have one type of insurance, like home or auto, you might be able to get life insurance from the same provider for lower rates. For instance, both life and auto insurance are types of insurance that Progressive offers.
If you’ve recently gotten pregnant or intend to do so soon, the best time to get life insurance is usually before you are pregnant or during the first few months of your pregnancy.
If you’ve just had a baby, an insurance company may decide to put your application on hold until you’re a few months away from giving birth. Still, an adviser may review your application and inform you when you’ll be allowed to apply.
If you’re planning on adopting a kid or having a child via a surrogate, there are a few things to consider. Be aware that the life insurance application procedure might take up to six weeks. It makes sense to start planning for your child’s financial security before you ever meet them.
Lastly, if you want to have a family within the next three to 15 years, or you intend to have a kid even if it’s in the far future, you should apply as soon as possible to lock in reduced rates.
Act Sooner Rather Than Later
Life insurance should be seen as a tool for budgeting. You wouldn’t put off starting a 401(k) until you were retired, and you shouldn’t put off getting life insurance until you had a kid.
The ideal time to purchase life insurance is now, whether you’re planning on having children in the future, are a new parent, a single parent, are pregnant, or are in the process of adopting.
Most new parents should choose a term life insurance policy with a duration of 20 to 30 years since it provides coverage when your children are most reliant on your income.
Imani Francies writes and researches for the life insurance comparison site, LifeInsurancePost.com. As a mother, Imani frequently explores and stays up-to-date on insurance trends to help families find the best coverage.
