What New Parents Should Know About Life Insurance
Life is unpredictable. Make sure your young family has a financial safety net.
So, you’re either planning on growing your family or you already have, congrats! Now that the congratulations are out of the way, let’s get “real” for a second. Kids are expensive. The U.S. Department of Agriculture published a report in 2017 stating that the average cost of raising a child to age 17 is $233,610. (Note: that’s not even counting college.)
Undoubtedly, your kids are worth every dime. So, providing a financial safety net for them needs to be at the top of your to-do list.
Most new parents who are thinking about life insurance have more questions than answers. Here are a few frequently asked questions, our answers, and a little bit of advice.
Do Both Parents Need Life Insurance?
Yes. Life insurance isn’t just for parents earning a salary. If you’re a stay-at-home parent, you’re invaluable - literally. Can you calculate how much it would cost to pay for someone to do all the things a stay-at-home parent does? (Hint: it’s a lot.) Stay-at-home parents should have life insurance to help pay for these unexpected expenses. If the stay-at-home parent were gone tomorrow, the working parent would need to pay for daycare expenses, nannies, and so much more.
When Should You Buy a Life Insurance Policy?
Here’s the deal: there’s never a better time to buy than now. The younger and healthier you are, the less expensive your premium (monthly payments) will be. However, if you find that the full amount of life insurance you need is too expensive, buy what you can afford now and plan to buy additional insurance later.
Who Should the Beneficiaries Be?
When you purchase life insurance you’ll name a primary beneficiary; this is the person who will receive the payout from the life insurance policy. Most parents will name each other as the primary beneficiary.
You’ll also be able to name contingent beneficiaries. These are the beneficiaries who will receive the death benefit if the primary beneficiary is gone. You cannot name your minor child as a contingent beneficiary, as they won’t be able to access the death benefit. However, if you want your minor child to be able to access the death benefit, think about setting up a will and/or trust for them.
What Is the Difference Between Term and Whole Life Insurance?
There are two popular forms of life insurance: term and whole life insurance.
Term life insurance is the most popular, simplest, and most accessible life insurance policy. This form of life insurance lasts for a set number of years, usually between 10 and 30 years, before it expires and you have to renew. The term is generally the length of time during which your child-rearing expenses will be at their highest.
Whole life insurance is permanent and does not expire; that’s what makes it more expensive. This form of insurance comes with a death benefit and cash value. The cash value is essentially a saving account included in your policy of which part of your premium goes into each month. While your death benefit is a set amount, your cash value grows over time; the cash value is also an account you can tap into while you’re still living.
There are various other forms of life insurance, but the type of life insurance you need depends on your financial situation and will require a bit more research on your end. We recommend working with an expert who can help you figure out what form of life insurance will work best for you.
At the end of the day, life insurance is a necessity as a parent. You want your spouse/partner and your children to be taken care of when you’re gone. Life insurance can offer you this peace of mind.
Do you have questions or want more information? We can help you protect what matters most. Reach out to one of PFGI’s insurance experts at 610-422-3530.