New Parent Checklist - Life insurance
Having a child is the most beautiful feeling in the world, and while it comes with its challenges, it brings a lot of excitement for the parents as well. Learn more..
New parents checklist
Having a child is the most beautiful feeling in the world, and while it comes with its challenges, it brings a lot of excitement for the parents as well. If you just had a baby, you may be all over the place, adjusting yourself with sleep deprivation and even some stress of taking care of a newborn. Or the case could be entirely different where you adopt a baby who may have already passed that early stage and you find yourself focusing on the big changes that it brings, both in your life and the baby. Providing that child with everything to make their life more comfortable as they grow probably the biggest concern of every new parent.
While you may not want to think about it, death is a fact of life and providing your child with protection in case the worst happens is extremely important. Having a good life insurance plan can be very helpful for that case, and we are providing you with a comprehensive life insurance checklist. Save this with you, and you can even share it with other young parents you know so they may also benefit from the new parents’ guide to life insurance.
Understanding life insurance
Given the surprisingly low number of families that have life insurance policies, it is important that you clearly understand what life insurance actually is. To put it in simple words, life insurance is a policy that provides your family with a certain amount of money when you die. This amount is determined when you buy the life insurance policy and is paid out to the beneficiaries defined in the policy. For most people, it is the spouse and children. If, for example, you decide to buy a life insurance policy worth $500,000, then your family will receive $500,000 at the time of your death.
The purpose of this money is to provide for their needs and expenses after you are no longer able to provide for them directly. The use of this money can be in a range of different ways, e.g. funeral expenses, paying the tuition of your children, house mortgage, house bills and any other expenses your family may have. With a big enough policy, you can also make room for larger expenses like college tuition fees. How they decide to use that money is completely up to them, unless you define certain conditions in your will as to how your insurance money is to be utilized. For parents who already have a life insurance policy, it is advisable to review their will with their attorney after a child is born or adopted.
Permanent vs term
As far as your life insurance checklist is concerned, the most important agenda in that checklist is the decision as to whether you want to get a term life insurance or permanent life insurance. While the basic concept of the two is the same, where they truly differ is in the payment of premiums and the payment of benefit.
Term life insurance, as the name suggests, is applicable only on a defined term. This term can be anything ranging from 10 years to 30 years. While these numbers can vary in some cases, this is the range that most insurance companies offer to their customers. You decide the amount of benefit you want and the time period you want the policy to run. According to that, the insurance policy calculates the amount of premium you are liable to pay during that period. Young people are often charged quite less due to their high life expectancy. In addition to that, the general rates of term life insurance are also quite low. The reason for that is the fact that term life insurance policy only provides a benefit if the person buying the policy dies during the policy term. If the policy lapses and the person stays alive, the benefit gets cancelled.
Permanent life insurance is a policy that runs for your whole life and depending on the value of the policy and the number of years actuarially left, the insurance company will decide the premium that is to be paid every year. The total amount of the policy is payable either at the time of completion of the policy period or if the policyholder dies while the policy is still active. Since the payout at the end is guaranteed, it is a lot more expensive as compared to a term life policy.
For new parents creating a life insurance checklist, term life is often the preferred choice as it allows them to get insurance with less payment since money is usually limited in early years of marriage, especially at the time of having a child.
Factors for deciding policy amount
As per the new parents’ guide to life insurance that we are providing or any other life insurance checklist you may take, the critical decision of deciding the insurance value takes the most amount of thought. Several factors need to be considered when determining what amount you should get insured for. The most commonly considered factor is income, and the policy is taken as a multiple of that income by at least eight to ten times, perhaps more if you can afford it. This means that if you make $50,000 a year, your policy choice could be somewhere around $400,000-$500,000. However, there are a few other factors too that you should keep into consideration.
Your debts are probably the most important factor among your expenses. You need to make sure you are making room for your mortgage or any other significant loans that your dependents will not be able to pay off on their own. You can also factor in college fees for your children at this stage. Parents with new children coming should consider adding a rider to their insurance policy, thereby increasing their overall coverage.
The general rule of thumb when buying insurance is to make sure you buy more than whatever you think you can afford instead of being too cost-conscious.
The legal perspective
It is crucial that you also hire a legal representative for all your financial management in order to ensure a smooth handling of affairs at the time of your death. Having a will drafted is very important, especially if you want to pre-decide what is to be done with your wealth. Having an attorney in this regard is extremely useful as they can manage all your finances, make key decisions where required and ensure that your will is executed legally and adequately after your death. Most importantly, an attorney can make sure all matters related to insurance claim are taken care of professionally, and no hassle is caused to the grieving family.
The cost of your policy
The fact of the matter is, there is no to predetermine quote that you may or may not get from an insurance provider. The part of your life insurance checklist that deals with the premium payment are something that you need to discuss with the insurance broker you choose for your insurance policy. The new parents’ guide to life insurance runs on one very important rule, hassle-free experience. Traditional insurance companies still rely on agents visiting your house, sitting hours with you, filling long and tedious forms and other relevant processes.
However, the trend is changing fast, and new insurance companies, as well as some old ones, are now providing insurance services online as well. Emma's life insurance is a great example of online life insurance where you are able to do the complete process and buy a policy online without having to spend hours filling applications and giving interviews. The whole process is performed online, and the time required is quite minimal. This kind of service is especially useful for new parents whose hands are already full with taking care of their child, their jobs and a very busy routine.
What is the next step?
If you are a young parent and you have still not purchased a life insurance policy, it is about time you took that step. Your spouse and your children will definitely need that protection when you are gone, and it is a good idea to get a policy while you are still young. Whether you get a term life insurance or permanent life insurance will depend entirely on the analysis, you do use your life insurance checklist. Make sure you take into account all the factors we have provided and do extensive research before taking this step.
The new parents’ guide to life insurance provides a reliable way for new parents to decide what their best option is. Also, helping choose a policy that provides for their loved ones in the best possible manner, all without making it impossible to pay high premium payments.
Now that you know everything, you are ready to start looking for your ideal life insurance policy.