Becoming a parent results in life taking on new meaning. For many new parents, a child’s birth is an exhilarating experience. But it can also be daunting from a financial perspective. Having a new baby puts into focus the importance of financial planning and saving for your family’s future. New parents often feel like they need to be financially prepared for their growing families.
Life insurance is one way to provide for your family if something were to happen to you. We’ll explain how putting life insurance in place can help protect your children’s financial future and keep the lifestyle you want for them.
Different Types of Life Insurance for New Parents
There are two main types of life insurance: term life and permanent life.
Term life insurance is temporary. Term insurance is a good starting point for most new families. It’s typically the most affordable type of life insurance because you can choose a term length that fits your needs. Term insurance is useful for new parents to buy because it can help cover the years when you’re paying off your mortgage, saving up for college expenses and the costs of raising children.
Permanent life insurance lasts your entire life. Whole life insurance is permanent insurance that will cover you throughout your life and build cash value over time. Whole life insurance is useful because it doesn’t expire, as long as premiums are paid. It can make sense for those parents with a lifelong dependent, like a child with special needs. When you die, your children will receive the death benefit tax-free. You choose this amount when you purchase the certificate. Your children can use this money to help with your final expenses, like paying off any debts you may owe or paying for your funeral.
Depending on the term you choose, you can convert your policy into whole life insurance at the end of your term.
Why Should New Parents Buy Life Insurance?
According to the life insurance research organization, LIMRA, 44% of millennials estimate that the annual cost of 20-year term life insurance for a healthy 30-year-old is over $1,000 when it’s closer to $165 per year. Because life insurance premiums are based on a variety of factors (overall health, age, family history, etc.), it is hard to predict how much life insurance you will need. However, the younger you are when you buy life insurance, the more affordable it tends to be. LIMRA also points out that nearly 4 in 10 insured consumers wished they had purchased their policies at a younger age.
For most families, life insurance is a budget-friendly way to protect your family during the years they need it most. In exchange for monthly or yearly premiums, you have coverage in place if something were to happen. Life insurance is a sound financial plan, especially if you intend to continue growing your family. The coverage is typically affordable, and you’ll sleep better at night knowing your family is protected.
How Much Life Insurance Do New Parents Need?
To calculate how much life insurance to buy, you should think about your family’s financial needs and what that would be like if you weren’t here to support them. The USDA estimates the average cost of raising a child from birth through age 17 is $233,610 for families with an income of $59,200-$107,400. But single parents making $59,200 or more will spend $319,020 a year.
How much life insurance you require depends on your family’s unique needs. Think about how much your surviving spouse would need right now for expenses such as:
Finding the Right Life Insurance for New Parents
If you’re getting ready to welcome your new baby or thinking about having children, it’s important to ensure the financial security of your growing family. Life insurance is a way to help make sure your loved ones are taken care of even if you can’t be here.
WoodmenLife offers a wide range of life insurance and retirement products. If you’re ready to start planning for your family’s financial future, WoodmenLife can help. Click here to find your local Representative.
Term Life Forms: ICC16 8648 1-16 & Form 8648 1-16 (XX)
Whole Life Forms: ICC17 8678 1-17; 8678 1-17 (XX)]
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