As a new parent, you’re probably currently preoccupied with taking care of your new little one. You’re no longer living life on your own now, but you live for the family you’ve created.
Yet life is full of uncertainties. You might be asking yourself what will happen to your child when you suddenly pass away from an accident, disease, and the like. This is where life insurance comes into play.
A competitive and appropriate life insurance policy protects your family after your passing.
If you’re on the hunt for life insurance quotes ever since you’ve become a new parent, here’s everything you need to know about life insurance for new parents.
What Is Life Insurance For New Parents
Essentially, life insurance refers to a contract between the policyholder and the insurer wherein the latter agrees to pay a certain amount of money to the holder’s beneficiary upon their passing.
Just like other individuals, new parents also need life insurance from a reliable company or provider. With this coverage in place, the beneficiary/beneficiaries can use the money to support the remaining members of the family such as financing their child’s education.
However, to better understand how life insurance can work best for new parents, it’s essential to know its two main types. These can include:
- Term Life Insurance: It’s a life insurance common to families due to its low price. Thus, if you want a strong safety net against life uncertainties, then buying term life insurance makes a lot of sense. Most of these insurance policies are suitable for a period ranging from 10 to 30 years.
- Permanent Life Insurance: It’s a type of insurance that lasts for a lifetime. If you have a life-long dependent, such as a child with a disability, having permanent life insurance can be the best thing to avail to protect them even after your passing.
As you can see, there are options to consider when purchasing the right insurance policy as a new parent. But, whatever type of insurance to choose from, make sure to obtain one as soon as possible.
When it comes to your child and family’s future, there’s no better time to purchase than now. The earlier you get one, the less expensive your premium and other charges will be. When this happens, you can get the most out of your policy without dealing with high costs.
Things To Know About Life Insurance For New Parents
Most life insurance for new parents can provide financial protection to your little one and the rest of the household after your death. Yet if you want to ensure you obtain the right one, there are a few things to consider from the get-go. These can include:
Life Insurance Prices
Many factors affect the prices of life insurance for new parents. It varies among insurance companies and depends on the type of policy, the amount of coverage, and many more.
Other factors can mitigate the premiums you should pay to the insurance company. For example, if you’re younger and healthier, you may need to spend less premium than the older and unhealthier ones. If you’re a man, you’re likely to pay more than a woman.
Hence, if you want to pick the right insurance coverage within your budget, don’t hesitate to compare different insurance quotes before making a choice. This way, you can have peace of mind knowing your life insurance policy is suitable for your financial needs.
Naming Beneficiaries
Another thing you should know about life insurance for new parents is the rules on naming your beneficiaries. Since you’re buying coverage as a new parent, there are specific rules to follow when designating your beneficiaries.
For instance, you’ll appoint a primary beneficiary or the person who will receive the proceeds from your insurance. In most cases, the primary beneficiaries are the spouse or the co-parent. Apart from that, you’ll also designate your contingent beneficiary or someone who will receive the payout without the primary beneficiary.
Although your main reason for getting life insurance is to protect your minor child from uncertainty, you can’t name them as your beneficiary most of the time since they don’t have the legal authority to access the benefits.
Fortunately, if you want to safeguard your minor child’s interests after your passing, then setting up a life insurance trust can be an excellent idea. The trustee will hold and manage the insurance for your child according to your instructions. If you need help setting up a trust, you can work with an experienced lawyer to ensure the proper beneficiary designation.
Person Or People Who Must Have Insurance Coverage
Generally, both new parents should obtain life insurance coverage to ensure adequate protection against life’s uncertainties. But, if you and the other parent can’t afford to be both insured, you may keep the following circumstances in mind to determine who should get coverage and why:
- If you’re a lone parent and the other guardian is absent, you’re considered the breadwinner of your family. Hence, you should buy life insurance coverage.
- If you and the other parent live and provide childcare together, both of you should be insured to obtain enough insurance coverage. This is to ensure the surviving family can financially cope up with finance-related matters despite the other parent’s passing.
- If you’re living with the other parent to take care of your child, the person who should have life insurance is the one who makes the most money. Thus, if you’re earning more than the other parent, you should be insured as early as possible.
Amount Of Life Insurance To Buy
When purchasing life insurance for new parents, it’s crucial to think about the amount of coverage you want to protect your child and the whole family. This determination usually depends on your family’s financial needs after your passing or the time you can no longer support them.
To calculate the amount of coverage you need to have, you may consider the following factors:
- Other financial obligations, including education costs of your child;
- Years of income you want your life insurance policy to replace after your death; and
- Savings, investments, and other insurance coverage you have in your lifetime.
Bottom Line
As a new parent, you’ll always want to give your little one more financial protection when you’re gone. It’s one of the reasons why you should consider obtaining life insurance as soon as you can.
So, if you believe insurance coverage can take care of your loved ones after your death, keep the pieces of information mentioned above in mind.