- What Is Life Insurance and How Does It Work?
- The Types of Life Insurance
- Why Life Insurance Is Good For Your Family
- New Parents’ Life Insurance Checklist
The New Parents’ Guide to Life insurance
Having protection for your kids and your spouse shows that you care. With a financial safety net, your family will forever appreciate you.
Life as a new parent is nothing short of adventurous. During this period, you are literally on your toes. You need to check on the baby always, figure out what they need by reading their implicit cues, and just stick around. Through all these, buying life insurance is among the last things you want to hear. But have you given it enough thought?
When you have no kid depending on you, perhaps there isn’t much to worry about if something goes wrong, and you pass away. But the moment a child comes into the picture, the story takes a twist. You don’t want to think about anything that means a bad ending for you and your family, but it’s better to face reality. What if you weren’t there tomorrow? Will your young ones still be able to afford a smile because their education and upkeep are paid, and they don’t have to worry about where to get the next meal?
Having protection for your kids and your spouse shows that you care. With a financial safety net, your family will forever appreciate you. Here is the new parents’ guide to life insurance that points out the essential aspects that every new and expecting parent needs to understand.
What Is Life Insurance and How Does It Work?
Life insurance pays your beneficiaries a certain amount of money when you die while the policy is still in force. The amount paid to the beneficiaries is called the death benefit. The insured person decides the amount of death benefit to be paid to the beneficiaries. The death benefit chosen will depend on the needs of the family, the number of the dependents and any outstanding debts or mortgage
If you are not sure of the amount of death benefit that is best for you, contact Emma Life Insurance, and they will help you figure it out by assessing your financial situation.
For the insurance company to honor its end of the agreement, you should have abided to the terms of the contract and paid the premiums regularly.
The Types of Life Insurance
Life insurance can either be a term or permanent.
Term life insurance means that you are covered only for a specific duration. Most insurance companies offer term life insurance policies that last up to 30 years. Most of the time, we buy term life policies during the times when our dependents can’t do without our income. These include times when one has a young family and when they are servicing loans.
If the insured dies when the term life policy is still active, the insurance company pays the death benefit to the beneficiaries. If you buy a term life policy and you live beyond the agreed period, then the contract with the insurance company expires, and it is upon you to buy another life policy. By the time a term life insurance expires, the insured will generally have other sources of income and savings that can be used by the beneficiaries.
Another form of life insurance is permanent life insurance. The permanent types cover the insured throughout their lifetime as long as the premiums are paid. Whether you die tomorrow or after forty years, your beneficiaries will still be paid. Some of the examples of permanent life insurance include whole life and universal life. The permanent policies have a cash value add-on, and therefore you pay more in terms of premiums.
As a new parent, you need to decide which type of life insurance is the best for you. If you only want coverage for a short time, then term life insurance should be your choice. However, if you have someone who is going to depend on you for a long time (such as a child with a disability), then you can go for permanent life insurance. This is also an excellent option if you want your insurance to have a cash value option which grows as you keep paying premiums,
Why Life Insurance Is Good For Your Family
Without the breadwinner’s income, the family members are left in anguish. It is for this reason that the family and other dependents need protection. The death benefit will cushion the family from suffering the consequences of your absence in case you pass away.
Having life insurance means that your family can maintain their living standards using the money that you set as the policy amount. If there are any debts or mortgages that you leave behind, your property won’t be auctioned, and your kids will not receive eviction notices. All because you had a plan.
The cash value component of life insurance can benefit the family even when the insurer is still alive. The insured can take loans against the cash value and use the money for developmental projects that will be a source of income for the family in the future. After several years of paying for life insurance, you can have enough cash value to pay for the subsequent premiums, and this means you can channel the money for premiums to alternative usage.
New Parents’ Life Insurance Checklist
We have prepared this life insurance checklist to guide you as a new parent so that you give your family the best. Before buying life insurance, these are the things that should run through your mind.
Do You Need Life Insurance?
Buying life insurance means that some of your income will now be directed to paying for monthly premiums. So, before you go shopping for a life policy, the first thing to think about is whether you really need life insurance.
The truth is, most people need life insurance, simply because we don’t know what tomorrow holds. Anyone with a dependent need to have cover for them. The dependents could be sick parents, children who are going to school, or a spouse. Even those who don’t have dependents will still have the final expenses or estate taxes to be paid. All these cost money, and life insurance is one of the sure ways of ensuring your costs are well covered.
How Long Do You Need Insurance Coverage?
If you want temporary insurance coverage to take you through a certain period in your life, then you can opt for term life insurance. Most young people prefer this type because it is affordable and covers the period that the family needs the income of the insured.
A permanent life insurance policy, such as whole life insurance, is an excellent option for people who want to do estate planning and those who want lifelong coverage.
How Much Life Insurance Do You Need to Buy?
Imagine that you weren’t there for your family. How much money would they need to cover for their expenses, and for how long would they need it? These minus your savings can give you a rough estimate of the policy amount you need to include in your life insurance.
To get a more accurate figure on the amount of life insurance you need to buy, you can talk to the experts at Emma to find out what your dependents will need in your absence. You can also use online calculators to find the correct amount. Because insurance companies operate under different terms, it is best to get a quote from your insurer.
The Application Details
When making the application for life insurance, the insurance company needs to know some information about you. This helps in assessing your health risks and your capability to pay the premiums. You will need to give accurate information about your health status, age, lifestyle habits, as well as income. Being factual when giving this info is of the essence because lying could lead to termination of the contract with the insurance company.
Should Both Parents Have Life Insurance?
Have life insurance for both parents is a great idea. Many people think that the breadwinner is the only one supposed to have life insurance. But let us look at a case of a stay-at-home mum who doesn’t have life insurance and unfortunately dies. The services she used to provide, such as caring for the children, will now need to be replaced, and this can be quite expensive. Life insurance, in this case, might save the family a great deal.
If having two separate policies doesn’t sound so attractive, you can try a joint life insurance account where the surviving spouse gets the death benefit if the other dies.
Choosing The Beneficiaries
The beneficiaries are the people or organizations that are paid the death benefit when you die. Your choice of beneficiaries should be well informed. Selecting a minor, for example, will call for the appointment of a guardian through a legal process before the payments can be made. Most people want their spouses as beneficiaries, but having a life insurance trust is also an option.
As new parents, life insurance is a great thing to consider. It will be of immense help in the unfortunate event that you pass away. Shop around and choose the life insurance policy that will be best for you. With this guide, you will be well informed by the time you are ready to sign the contract with your insurer.