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New Parents & Life Insurance: What You Need to Know

March 22, 2021

by kyle anderson, guest contributor

Starting a family is an exciting rollercoaster full of twists and turns, ups and downs. It's wise to expect the unexpected in parenting. One of the realities of starting a family is the financial obligation it entails and having  a solid financial plan is important. Today we're looking at an area of financial planning that people tend to avoid talking and thinking about: life insurance. But making this a priority is imperative because this puts a plan in place for the unexpected in life. 

Here are key facts about life insurance that you need to be aware of as a new parent:

Life insurance isn’t as costly as you may think

It’s astonishing how people overestimate the cost of life insurance, often thinking that it's unreachable to them. Whereas the cost varies based on your specific needs and insurer, overall, life insurance premiums are quite affordable. Before making any assumptions, try to contact a reliable financial advisor like Caspian Insurance for a free quote. You can also compare multiple insurers to find out how much it costs to cover your risks.

Life insurance is versatile

A lot of people assume that this category of insurance only protects people’s lives. But the truth is life plans do more than just cover your life. As a new parent, chances are that you have plans for your family that need financial backing should you pass away before completing them.

Depending on your needs, life insurance can take care of the following:

  • Mortgage payments
  • Utilities
  • School fees and supplies
  • Car loans
  • University costs
  • Final expenses

The sooner you purchase, the less you pay

You want to grab the earliest chance to take out a life insurance policy because it’s more affordable at a younger age particularly if you have no pre-existing health conditions. Your insurer is obligated to extend a benefit payout to you as the policyholder when a risk occurs. To keep their losses down, they charge you higher premiums if you are older and not in good health. On the other hand, if you’re young and healthy, they reward you with lower rates for the entire policy period. This is because technically, your chances of survival are higher than older applicants with pre-existing conditions.

Life insurance can take care of childcare

The last thing you want to imagine as a new parent is you or your partner departing prematurely while your child is still young. Unfortunately, that’s a possibility we must accept and plan for. If one parent dies, the surviving one could end up struggling to take care of the children. The situation gets worse if the parent who’s been left behind has no sufficient income of their own.

Life insurance comes to the rescue under such circumstances as the surviving parent could use the policy’s payout to afford childcare. 

Employer-provided life insurance may not be enough

Whereas employer-provided life insurance is mostly free or low-cost, it comes with lots of strings attached. Besides, it may not be sufficient to cover your young family’s needs. For instance, if your job situation changes, where you get transferred, let go, or reduced to part-time status, you might lose the coverage.

That aside, you’ve probably heard that having dependents relying on your income requires coverage at least six times your annual salary. And that’s something you can’t get from employer-provided life insurance. For comprehensive coverage of all your needs, we recommend taking out an additional life policy besides the employer-provided one.

Different types of life insurance available for new parents

There are several life insurance policies to consider as a new parent. Here are a few that we highly recommend:

Level term life insurance

  • This policy offers a lump-sum payout if you pass away within the contract period. It’s low-cost and you can decide how long you want it to last plus the amount of cover.

Income protection

  • This plan offers you and your loved ones financial security if you’re unable to work due to injury or illness. Most income protection policies usually cover 50-70% of your salary.

Family income benefit

  • This policy gives your beneficiaries a payout in monthly installments if you pass away within the contract period.

Critical illness cover

  • If you were to get diagnosed with a defined critical condition, this policy offers financial protection during the diagnosis, treatment, and recovery process.

Life insurance offers the much-needed peace of mind for new parents. With it, you can rest easy knowing that your young family is financially protected no matter what happens to you in the future.

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