New Parent’s Guide to Life Insurance
If you have recently experienced the joy of welcoming a little one into your family, you know how important it is to provide for them and protect their future. This is when new parents start to think more seriously about life insurance.
Life insurance can be an intimidating topic for new parents, and they have many questions like; What type of insurance should they get? And do they also need life insurance for their child? In this article, we will go through life insurance basics for new parents to help them as they make these important decisions.
Why Should Parents Get Life Insurance?
As a new parent, you want the very best for your child. And you want to see them grow and experience important milestones in life. But what if you weren't there? Would your child still be provided for? Knowing that you have adequate life insurance is one way of providing that protection for your child.
A life insurance policy provides a death benefit in the event that you can't be there for your child. It can help to pay for their care or their education. It can also provide support to your spouse should they face the difficult task of raising a child alone.
What Type of Life Insurance Should I Get?
There are two main types of life insurance: temporary life insurance and permanent life insurance. If you are purchasing life insurance for the sole purpose of providing for your child until they are an adult, then a Term-20 policy is often enough. This is a temporary policy that lasts for 20 years without any increases in the premium.
As a new parent who likely has a limited budget, temporary insurance is also the most affordable option.
But if you can make the payments on permanent life insurance, the advantage is that you can use the insurance for other purposes – such as supporting your spouse or leaving a legacy – once it is no longer needed to support your child.
Can I Name My Child as My Beneficiary?
You may name your child as your beneficiary on your life insurance policy. However, if they are under 18 years old, you will also have to name a trustee. This person will manage their money for them until they are a legal adult.
Often, the trustee will be their other parent, but it may be anyone you choose. Just make sure that you choose someone you trust and good at managing money.
What Are Child Riders?
A child rider is a clause you put into your own life insurance policy but pays a death benefit should your child pass away.
While no parent wants to think about the possibility that they might survive their child, having a child rider on your policy can help ensure that such an emotionally devasting time won't also be a financial burden.
Should I Get My Child their Own Life Insurance Policy?
While a child rider is typically more than sufficient to cover final expenses should the unthinkable happen, there are some good reasons to consider getting your child their own policy.
Since the cost of life insurance is based partly on the insured's age, your child's life insurance policy will never be less expensive than it is now. That means you can get them a permanent policy for a very low monthly rate – a policy which will build up cash value over time. When your child is grown, they will have the option to borrow from this cash value to help pay for school, put a down payment on a home, or pay for their wedding. They will also have insurance coverage which they can use to protect their own families.
Purchasing life insurance for your child is a great way to give them a really good start in life!
Contact ICD Insurance Today
Are you a new parent wondering how you can best protect your family with life insurance? Contact us today to speak to one of our brokers.