Life Insurance for New Parents

After becoming a parent, your priorities will likely instantly shift to your child's well-being. In the early days, you might be sleepwalking through a haze of around-the-clock feedings and frequent wake-ups, so financial planning may not be at the top of your mind.

Before you welcome an addition to your family, it's generally a good idea to look into life insurance for new parents. Doing so will help you cover your bases during this joyous (but yes, often somewhat stressful) time.

Why Do New Parents Need Life Insurance?

Life insurance for new parents provides a measure of financial protection for your family: Coverage will help ensure your children are cared for should you or your partner unexpectedly pass away. And life insurance isn't just for working parents, either. Stay-at-home parents perform crucial work in providing for their families. Given that, it's generally a good idea to have life insurance protection in place for parents who work both in and outside the home.

Whether you recently welcomed a new bundle of joy or you're still deciding whether to start a family, here's some of what you need to know about life insurance for new parents.

How to Calculate Your Life Insurance Needs

You may have heard that you should multiply your annual income by 10 to calculate how much life insurance you need. But the truth is there's no simple formula to determine coverage. An amount to be targeted varies depending on several factors.

As your family grows, evaluate your individual circumstances to calculate your life insurance needs. A person with three children might need more coverage than someone with one child, for example. Other factors, such as whether your children attend private schools or live in an area with a higher cost of living, might drive up your insurance needs.

Not sure where to get started? An online life insurance calculator can help you come up with a ballpark estimate of how much coverage you may need. These calculators can account for factors including your current income, existing life insurance coverage, number of children, debts and assets, and years of coverage needed.

What Type of Life Insurance Policy Should New Parents Consider?

Life insurance policies, just like coverage amounts, aren't one-size-fits-all. There are several types of life insurance to consider when shopping for protection. Two popular types of life insurance for new parents are term life and whole life.

Benefits of Term Life Insurance for New Parents

Term life insurance provides coverage for a set period known as a term. For new parents, the benefits of this type of life insurance include:

• Lower premiums, leaving more room in your budget for expenses, such as childcare and the costs of raising children.
• Temporary coverage, with terms ranging from 10 to 30 years, allowing you to adjust coverage as your kids grow and your needs change.
• Simplicity. It's easy to apply for term life insurance, which is a relatively straightforward type of coverage compared to other options.

Keep in mind, term life insurance only pays a death benefit during the specified period of your policy. If you die during the term, your beneficiaries will receive the death benefit. If you outlive your policy term, you will lose coverage when the policy expires.

In many cases, you can take out a new policy after your old one expires. By then though you'll be older, so your premiums will likely be higher. You may also need to repeat the application process, including a medical exam, once again.

Benefits of Whole Life Insurance for New Parents

Whole life insurance is permanent protection. It lasts your entire life. Your policy never expires as long as you pay your premiums. It may even accrue a cash value over time.

For new parents, potential benefits of whole life insurance include:

• Lifetime coverage that never expires as long as you pay your premiums, providing financial protection for you and your beneficiaries.
• Fixed premiums that won't increase over time, making it easier to budget now and in the future.
• Cash value that you can borrow against while you're alive.

For the same amount of death benefit, whole life insurance premiums are more expensive than term life premiums. Given that, whole life insurance may not be affordable for everyone. If the policy's cash value is important to you, make sure you understand the specifics of your plan: Not all whole life policies provide a cash value. Also, different rules and provisions govern how you can access the value of your policy.

   Select life insurance that adapts with your family's evolving financial needs. Get a Free Life Insurance Quote  

Choosing the Right Life Insurance Policy

Do your research before moving forward with any life insurance policy. To start, take inventory of your priorities. Some questions to ask yourself include:

• If I die, will my partner be earning income?
• Will my family be able to make ends meet (paying rent or mortgage, utilities, groceries, etc.) without my income?
• How will childcare be impacted? How much will it cost?
• How much money will my family need today versus several years in the future?
• How much will my children's education cost in the years to come?
• How much life insurance, if any, do I currently have through my employer?
• Will I leave my children with any inheritance?
• How much debt will I leave behind?
• How will my family pay for a funeral and other final expenses?

Do your research before deciding on a life insurance policy. Speak with a financial professional about different types of policies. See what kind of coverage you're eligible for and compare what different options will cost.

You may also want to consider life insurance riders, which are optional add-ons that cushion your policy with additional protection. One rider some new parents often consider is a child term rider, which adds coverage for the policyholder's children. This could help you pay for a funeral or other costs if your child dies unexpectedly.

You may also want to consider taking out a separate life insurance policy for your baby. A term or whole life policy can provide some funds for a family in the event of a tragedy. Coverage for young children is generally affordable. And it provides a measure of protection if the child is unable to qualify for more coverage later in life.

Life Insurance Application Process for New Parents

Everyone who purchases life insurance undergoes an application process. The steps generally include filling out an application, possibly scheduling a medical exam of some type, going through underwriting and naming a beneficiary.

When you apply for a new life insurance policy, expect to answer a series of standard questions. Subjects will include your:

• Age
• Medical history
• Marital status and family
• Profession
• Personal financial information
• Lifestyle habits and hobbies (i.e., smoking, motorcycle riding, etc.)

If you apply for a policy that requires a medical exam, it may done through your primary care doctor or a paramedic. The healthcare professional will take your vital signs and look at your overall health. They may order tests, including blood work or a heart test, such as an EKG. They will also ask about your family's medical history.

During the underwriting process, the insurance company reviews your application and determines the policy and coverage for which you are eligible. This process can take several weeks.

Once your application is approved, you will select your policy's beneficiaries and pay your first premium. If you have a spouse or partner, you may list them as your primary beneficiary. In other cases, you may list another trusted adult as the beneficiary.

In addition to taking out a life insurance policy, you may want to work with an attorney on a detailed estate plan. Within your will and estate planning documents, you can designate who will manage your children's finances if you or your partner pass away.

Common Mistakes to Avoid

Try to avoid these common pitfalls when it comes to life insurance for new parents:

1. Waiting Too Long to Purchase Insurance

Unfortunately, tragedy can strike at any time, even in the early days of your child's life. It's better to take out a policy now than wait too long. Even if you haven't decided whether you plan to start a family, a life insurance policy helps protect your partner and other loved ones if you die unexpectedly.

2. Not Purchasing Enough Coverage

If you're relying on a small life insurance policy provided through your employer, you may not have enough coverage to adequately provide for your family. Use an online coverage calculator or work with an insurance professional to ensure you have a reasonable amount of coverage to account for childcare, your kids' education and your family's basic needs.

3. Not Designating a Beneficiary (or Forgetting to Update Beneficiaries)

Relationships can change over the years, and with them so can your plans. Regularly review your beneficiaries to be certain your death benefit will go to whom you intend. If a designated beneficiary passes away, select a new one as soon as possible. Minor children can't be listed as beneficiaries, but you may wish to add a child as a beneficiary once they reach age 18.

4. Neglecting to Insure Stay-at-Home Parents

Stay-at-home parents aren't paid a salary, but they do invaluable work, including providing childcare, performing home maintenance and more. A life insurance policy for stay-at-home parents can help surviving family members bridge the gap on these crucial tasks.

Life Insurance to Benefit the Whole Family

When you become a parent, your priorities as the provider for your child quickly come into focus. The best life insurance for new parents will provide financial protection for your children and help keep your family secure in the event of an unexpected death.

Whether you opt for a term policy to prioritize coverage in the short term or a whole life policy to provide financial protection for your entire life, life insurance helps provide a valued measure of confidence for any new parent.

   Customize your life insurance to match your family size, lifestyle, and financial obligations. Get a Free Life Insurance Quote