When you become a parent, you gain many new responsibilities and priorities that you didn’t have previously.
Your children become your sole focus of protection, leading you to wonder if you should invest in life insurance.
It may feel too early to invest in the life insurance or too expensive as a new parent. However, there is no better time to invest in life insurance than as a new parent.
Below we’ll address all the reasons that life insurance is a wise investment even with a newborn.
First, you must understand the purpose of life insurance.
What is Life Insurance?
Life insurance is a contract where a beneficiary will be paid a death benefit at the time of the insured person’s death.
This means that if you were to die, your children and partner would have money to cover their needs, such as paying off mortgages and college tuition.
By investing in life insurance, you’re ensuring that your child will be taken care of during your absence.
When is the Right Time to Invest?
As you age, the price of life insurance policies increases. This means that the most cost-efficient time to purchase life insurance is as a young, new parent. If you lock in your rate now, it will pay off over time.
It’s also never too early to protect your children. As a young, new parent, just starting your family, it can feel like you’re invincible or that death is a long way off.
However, life can have unexpected turns, and it’s better to be safe than sorry when it comes to investing in life insurance.
What is the Right Life Insurance Policy?
Investing in life insurance can feel abstract because you need to plan for a time in the future. However, there are ways to determine how much life insurance to buy right now.
Below are some of the best questions to ask yourself to help determine how much life insurance is right for you and your family.
- How many years of income would you like your life insurance policy to replace?
- Are there other debts you know may arise, such as college tuition?
- Add the cost of services you provide.
- Subtract your savings.
Once you decide how much life insurance you want to buy, you can start looking at which policy is right for your needs.
Types of Life Insurance Policies
Below are seven types of life insurance policies.
- Term: Your life insurance lasts for a specific amount of time. Your beneficiary will get a lump sum of money known as a death benefit.
- Whole: This type of life insurance doesn’t expire. Your beneficiary will get a death benefit, and investment-like savings account known as cash value.
- Universal: This life insurance policy is the same as a whole policy, but you can change the premium and death benefit without needing a new policy.
- Indexed: This is comparable to stocks or bonds. A specific index sets the interest rate for your policy.
- Variable: The money you pay for this life insurance policy goes into mutual, fund-like sub-accounts. You can have growth, but you can also have loss depending on the market.
- Variable Universal: You can adjust your premium and death benefits without switching policies, and you can invest in cash value.
- Final Expense: This policy only covers costs related to your death, such as the funeral.
- Group: This is an employee benefit provided by an employer.
If you are still unsure which life insurance policy is right for you, contact a texas life insurance attorney to help you make an informed decision.
How Much Does Life Insurance Cost?
A big concern for new parents when it comes to investing in life insurance is the cost.
However, it’s easy to overestimate what you think it will cost. On average, life insurance costs around $26 a month. While this is the average cost, it will vary depending on your insurer, policy type, age, health, and other factors.
Life insurance is cheaper the younger you are, making being a young, new parent a great time to invest.
Should Both Parents Get Life Insurance?
As new parents, it can feel like a money-conscious decision to only insure one of you. However, it’s a good idea to get life insurance policies for both parents. This can help protect your children and your partner.
If you die, it can help them pay bills and provide for your children’s needs in your absence. If only one of you gets life insurance and the one that’s not insured dies, there would be no death benefits to support the needs of the family.
If you’re a new parent, now is the time to get life insurance. It’s not only the cost-efficient choice but the choice that protects your family now. It’s never too early to ensure that your partner and children will be provided for in the future.
About the Author:
Veronica Baxter is a writer, blogger, and legal assistant located near Philadelphia. She frequently works for Chad G. Boonswang, Esq., a busy Texas life insurance lawyer.