New parents should prioritize getting life insurance.
Parenthood changes life significantly.
Rather than two adults being responsible for themselves and each other, they must now rear and protect a child.
While motherhood and fatherhood expand joy and love, they also bring attending concerns and fears.
According to a recent Bankrate article titled “Life insurance for parents,” financial issues and decisions now impact children as well as the couple.
Some new parents may choose to have one parent stay home or work part-time.
Other families decide having two incomes is the best means of supporting the household.
Either of these choices requires new parents to consider whether their family will be secure financially should one of the parents die.
Covering the costs of education, food, mortgages, and bills can be a greater challenge on one income, especially without the support of a partner to help drive children to appointments, stay home with them when they are sick, or make extra money for childcare.
If these questions are keeping you awake at night as a new parent, you should purchase a life insurance policy.
Not all life insurance policies function the same way.
The one you choose will be specific to your unique circumstances as new parents.
With a whole life insurance policy, the policy is “permanent” and pays a benefit when you die.
This policy also has a cash value component.
You can borrow against the cash value or take a full surrender of the cash value.
By taking a loan you will reduce the final death benefit payable to you, since the policy death benefit is actually collateral for the loan.
Do this only as a last resort.
If you take a full surrender of the cash value, then the policy will cease to exist.
As long as you continue to pay the premium on a whole life policy, it will usually not expire.
As a new parent, you should know the difference between whole life policies and universal life policies.
They are similar in regard to both being permanent polices.
While a universal life policy also has cash value, this value is set based on a money market interest rate.
Typically, these policies are more flexible than whole life.
You can make changes as your life changes, including increasing your death benefit later if you pass a medical exam.
Death benefits are available after a person with variable life insurance has died.
Variable life insurance can also serve as an investment tool.
You can choose to invest your coverage cash value as stocks, bonds, or money market mutual funds.
New parents investing the cash value should remember death benefits could be reduced if the market and chosen investments perform poorly.
With term life insurance, you can have a set policy period.
Think of it as “renting” the policy year to year.
These work well if you only desire to have coverage for a certain time period.
One example would be to keep the policy until your children graduate from college.
Although term life insurance policies pay death benefits, they do not accumulate a cash value.
If you and your spouse are new parents, discuss your goals and life insurance options with an experienced life insurance professional.
He or she can help you evaluate how much coverage you need, then counsel you regarding the right policy for your circumstances.
You might ask about “convertible” term life, so you can convert the term insurance to a permanent policy later on as your income and assets increase.
Reference: Bankrate (July 26, 2022) “Life insurance for parents”