Should New Parents or Parents-to-Be Get Insurance?

Congratulations on your little bundle of joy! The moment you wrap your baby in your arms, your life takes on a different trajectory, and all of a sudden, there is nothing in the world that is more precious than your child. Becoming a parent for the first time is exciting, but it’s not all sunshine and rainbows; it is also challenging and terrifying. Now you have the added responsibility of wondering how you can care for this baby that is entirely dependent on you.

Days will slip into months and years, and before you know it, your baby will attend school, make friends, go to college, and build their own life. Until then, it’s vital that you make the correct decisions and plan how you hope to protect your children financially when you’re no longer around. This is why parenthood often motivates people to look for life insurance.

Do New Parents Need Life Insurance?

Think of life insurance as a safety net against the inevitable and unpredictable ups and downs that life throws us. Haven’t we all heard numerous stories about people dealing with sudden deaths and unforeseen health issues that put them in financial dilemmas? This is certainly not something you would want for yourself, and this is also where life insurance becomes a lifesaver.

Here’s a fact – children are expensive to raise. In fact, according to the USDA, the average cost of raising a child from birth until 17 years of age is over $310,000 for a middle-class family. So, ask yourself this question: will your spouse be able to handle all your child’s expenses single-handedly if something happens to you?

Best Life Insurance Policy for New Parents 

There are two main options for picking a life insurance policy:

Term Life Insurance

This is an affordable option that offers coverage only when you need it, which is specifically when your children are growing up. As its name suggests, term life insurance lasts for a certain amount of time, between five and thirty years. This policy makes more sense for most parents who want to protect themselves until their children are independent enough to care for themselves.

Permanent Life Insurance

This is a more comprehensive option that doesn’t come with an expiration date. The coverage lasts until death and bundles up as a great investment tool. It’s more expensive but makes sense if you have a child with special needs. Moreover, wealthy parents also use it for estate planning.

For young parents, term life insurance is a good option as the 20–30-year term life is perfect for securing coverage when kids depend on their parent’s income. The children would have grown up and become financially independent when the policy ends.

If you are a parent to a child with special needs, permanent life insurance would be the way to go since it offers lifelong coverage. Knowing that your dependents will get the payout upon your death will give you peace of mind.

What is the Right Time for New Parents to Buy Life Insurance?

Well, there’s no time better than the present. Besides, every year you delay buying a life insurance policy, your rates will potentially go up by 4.5-9%. Let’s quickly take a deeper look:

  • If you plan on having a child in the next 3-8 years, apply for a life insurance policy as soon as possible to get lower rates. Don’t wait until you’re pregnant to buy life insurance.
  • If you’re expecting a baby, you can get coverage, but it might come with higher premiums. Since pregnancy is often tangled with medical complications, your rates can increase accordingly, too. Make sure to apply before you get pregnant or at least in the first few weeks of your pregnancy.
  • If you plan on adopting a child or having a baby through a surrogate, the application process can take about six weeks. Therefore, be sure to have your life insurance plan sorted out before your child comes home so they are financially secure.

How Much Life Insurance Do You Need?

If you’re a new parent, you would ideally want your policy to cover earnings and spending in addition to childcare expenses, mortgage, and even funeral costs. So, a death benefit amount of about 10-12 times your annual salary is a good figure to keep in mind. Financial advisors also suggest multiplying your income by the years you want to support your family and adding $100,000 for each child. Having said that, the estimate would vary according to the needs of each family.

Do Both Parents Need Life Insurance?

Ideally, yes. If one parent gets life insurance, but the uninsured parent dies, then it would be as though there was no life insurance policy in place at all since the one who passed was not covered. Besides, even if your spouse is a stay-at-home parent, getting a life insurance policy is still a good idea. We often forget that stay-at-home parents provide essential services like child care which would have to be replaced if they were to die.

This is why both parents must get life insurance to cover all angles. You can opt for a joint policy if you wish, but it doesn’t offer the same level of protection as the individual options.

Bottom Line

If you decide to get life insurance, it shows how much you love your family because you have already thought about not putting them in a difficult spot if you die unexpectedly. Thinking about death is difficult, but if you want to secure your family’s future, you must also plan diligently.

Of course, life insurance cannot replace you, but it can compensate for some or all of your income. When you have a life insurance plan, you ensure your family can continue to live comfortably after your death. The payout can go a long way in helping your spouse to keep the family’s finances in check, pay off the mortgage, cover tuition fees, and even fund their retirement.

So, no matter where you are in your parenting journey, getting life insurance now is a great way to secure your future and that of your loved ones, which could be your spouse, children, grandchildren, or other close relatives who are a part of your life.