Did you know that around 360,000 babies are born every single day? With so many new parents a baby will change your outlook on life. Before having a baby you might have never thought of things like life insurance because no one depended on you before.
We are going to talk more about life insurance options to help you make an informed decision when it comes to ensuring that your family is covered.
Life Insurance Options
First, we want to go over the different life insurance options that are available. The two options are whole life insurance and term life insurance.
Term life insurance is when you choose a period of time that you want to be covered (10, 20, 30+ years) and you pay a monthly amount to cover you for the specific amount of money you want. The amount can range up to a million dollars if you wish to leave this amount to your dependents.
Keep in mind that with term life insurance anything you pay towards your premium will be lost once the policy term ends unless the policyholder dies and the beneficiaries are paid.
Whole life insurance, on the other hand, covers a policyholder for the rest of their lives. Also, a portion of what you pay is invested for you to have access to in the future and be able to use the money tax-free. These policies are more expensive than term life because of the investment bonus.
Companies like Simplelifeinsure.com will help you have instant quotes from multiple companies to make choosing a bit easier and less overwhelming.
Both Parents Should Consider Having life Insurance
Sometimes couples feel that only the breadwinner should have life insurance but honestly, it is best if both parents are covered. No one ever knows when something unexpected or tragic will happen and if the parent that is not making money unexpectedly passes this will leave the other parent dealing with the added stress of funeral arrangements, child care services, etc.
Even a stay at home parent is valuable because they are saving money by not sending their child to daycare and taking care of other things such as laundry, cooking, etc. The breadwinner will be left with taking care of this on top of working and on top of the emotional toll that losing their partner will bring.
How Much Life Insurance?
The best way to figure out how much life insurance to buy is to think about your family’s expenses at the moment. Add up all of your monthly expenses and then multiply it by 12 (a full year of expenses). Once you know how much you spend annually you can decide how many years of income you want your life insurance policy to cover.
Do not forget to include all of the debts and financial obligations you have as well if you do not have coverage on your loans and credit cards to cover you if you were to pass away.
Beneficiaries
When you buy a life insurance policy you have to set up who will receive the money if you pass. Most people add their partner or spouse as the main beneficiary to distribute the money as needed.
When you have minor children you do not want to name them as beneficiaries because the life insurance company will not be able to pay them until the court appoints a guardian.
If you want to add them as beneficiaries the best way is to set up a life insurance trust that will hold money and property for your kids. Name this trust as the beneficiary and then appoint a trustee to manage the trust according to the instructions you leave.
Factors That Affect Price
Life insurance is priced depending on the type of policy you choose, how much coverage you opt for, and for how long you are covered. Something else that is taken into consideration is your age (the younger you are the cheaper it is), your sex (typically women pay less than men), how healthy you are, your smoking habits, and your hobbies.
Employer Life Insurance
If your employer offers group life insurance and you think you do not need to buy a policy, please do your research. You want to make sure that you have enough coverage. Typically life insurance provided by an employer is about one or two times your current annual salary.
If you are currently living paycheck to paycheck, this might not be enough coverage for your family if something were to happen. Another issue with a policy from an employer is that if you switch jobs you are no longer covered. Most policies are not portable and once you leave you lose that coverage.
The best thing to do is make sure that you have your own individual policy as well to make sure that you have enough coverage and if you end up changing jobs you do not have to worry about losing your coverage.
As a new parent, you might have a few unknowns such as if you will move from the area to raise your child in a safer location, or will you go back to school to change careers. Taking all of this into consideration will ensure that you opt for the best life insurance option for you instead of solely relying on your employer.
New Parents Are You Ready to Shop for Life Insurance?
Now that you see the importance for every parent including brand new parents to have a life insurance policy, it is time to go shopping. Make sure to weigh out your options on both term and whole life insurance policies to choose the best one for you and your family.
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