For many couples, having their first child is the turning point in their financial lives. You start thinking about ways to ensure the future and well-being of your child and spouse. This is the time when you should consider buying life insurance, because what would happen to your child if something were to happen to either of you?
Having life insurance can help put your mind at ease and it will protect your young family by providing coverage against unexpected death, illness or disability. Here are some things to consider before you purchase a life insurance plan.
There are numerous options for life insurance, but you can choose mainly between getting whole life insurance or term life insurance.
Term life insurance is the cheapest form of life insurance. It provides basic coverage for a specific duration of time, commonly between 10 to 20 years. It generally offers protection against unexpected death and Total Permanent Disability (TPD). The drawback of a term life insurance policy is that unless the payout is triggered by any one of the mentioned circumstances, all premiums paid will be lost.
On the other hand, a whole life insurance offers comprehensive protection for someone for as long as they live. Most whole insurance policies also function as savings and/or investment accounts where policyholders may benefit from interest rates. With all these perks, whole life insurance plans are typically a lot more expensive than what a term life insurance policy would cost you.
It all boils down to how much you’re able to afford to pay for the monthly insurance premiums. Term life insurance is usually the obvious choice for young parents who are just starting to build their lives while having financial security at the same time.
It’s common for both parents to be working professionals these days, which is the main reason why both parents should each have their own life insurance. Even if your spouse is a stay-at-home parent, it’s important to remember the valuable contributions both parents are making to support the family and raise the child. If any one of the parents dies or becomes disabled, you would need to hire help for childcare.
You need to understand your family’s financial needs and list them out in order to determine the right coverage amount that you should get for your insurance plan, especially if you’re buying term life insurance. After all, the coverage payout is meant to help your family live comfortably when you’re no longer there to provide for them.
Consider these: Are you looking to pay off your mortgage? Are you just looking to cover the costs of your childcare? Or are you also looking to pay off your child’s college tuition? Identify your priorities and select the most suitable amount of coverage based on your goals.
Insurance premiums will be based on your age, health risks, and current health status. Getting an insurance policy while you’re still young and healthy will cost you much less than getting one at a later stage in life - which may then affect your budget significantly. It’s better to start as early as possible so you can benefit from your youth - and not damage the finances for your entire family.
There is a common adage in insurance: “When you need it (insurance), no one will offer it to you”. Therefore, you should buy at least a basic plan when you are healthy and young and continue to upgrade.