When you become a father, there are a million things to think about, from baby-proofing the living room to stocking up on diapers. Chances are, getting life insurance probably won’t even make your list of considerations, but it should. To properly prepare for the new addition to your family, you have to review your financial situation including savings accounts, mortgages, and setting up a college fund. Here is why you should also include life insurance into your calculations and how to do it.
Why Get Life Insurance When a Baby Is Born?
On average, a middle-income American family spends $233,610 to raise a child from birth to age 17. In the best-case scenario, you and your partner will both be there throughout this period to watch your baby grow, love them, and support them financially. However, you also have to consider the alternative. An accident or an illness can radically alter the situation and leave your partner and child in dire financial straits. Especially if you are the one providing for your family. Taking out life insurance means that no matter what happens, you can be sure that your family will be taken care of. In addition, getting life insurance now rather than later on in life has the advantage that premiums are lower the younger and healthier you are.
What Life Insurance Options Are There?
Generally, there are two main kinds of life insurance: term life insurance and permanent life insurance. Term life insurance policies only cover a set period of time, typically between five and thirty years. For example, you could set the terms so that the policy expires when your child graduates from college. The major advantage of term life insurance is that premiums are lower. Permanent life insurance lasts a lifetime. You will pay higher monthly premiums, but in return, your beneficiaries will receive a provision no matter when you pass. Many permanent life insurance policies also include a savings component that you can access after a set period, for example when you retire. Some employers offer a life insurance policy, and if this applies to you, read the terms and conditions carefully. Coverage is often limited and, of course, ends when you change jobs.
How Much Coverage Should You Get?
Ultimately, how much coverage you should get depends on how much money your family would need if you were no longer around. Some factors to keep in mind are:
- Debts such as car loans.
- Mortgages on your home.
- College tuition.
- Child-care expenses if your partner is planning to go back to work.
As a rule of thumb, ten times your annual income is a good starting point. For a clearer picture, talk to a life insurance agent. They have years of experience and can help you choose the right coverage amount based on your assets, needs, and priorities. When you take out a policy, also check the fine print to see if you’ll be able to change the coverage amount later. If not, you’ll still be able to take out “top-up” insurance. This leaves the original policy untouched and just covers extra costs.
How to Estimate Your Premium?
For young, healthy men, monthly premiums can be lower than a movie streaming subscription. Premiums vary with the kind of insurance, coverage amount, and your age and health when you take out the policy. With some providers, premiums may stay the same for years or even decades. Others will adjust them annually. To get an estimate of how much you’d pay in life insurance, check out an online life insurance calculator. Once you have a better grasp of what you’re looking for in your policy, you can get quotes from different providers to compare.
Should You Get Life Insurance for Your Child?
Many insurance providers market life insurance for children. The principal argument is that having life insurance now will protect the child’s future insurability. This means they won’t have to worry about becoming uninsurable due to medical conditions. In general, this kind of insurance is unnecessary. The chances of your child developing chronic conditions that leave them uninsurable are minuscule. Instead, prioritize getting solid life insurance for yourself and your partner, or setting up a financial scheme to directly profit your child, such as a 529 college savings plan.
Your primary responsibility as a new father is to make sure that your family is taken care of. That your partner and child can be happy and safe. Taking out a life insurance policy can help you ensure just that. With the broad offer of life insurance policies and the very affordable premiums on limited coverage term policies, chances are that you can get insurance no matter what your financial situation is.
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