Becoming a parent is one of the most amazing – and terrifying – experiences a person can have. One minute, you’re an independent adult who is carefully planning their future (and sleeping past 6 a.m.). The next minute, you’re bringing your new bundle of joy home and wondering, “How am I going to keep this tiny, adorable human that is completely depending on me alive?”
It’s scary for sure, but you also have so much to look forward to. Having a child adds meaning to your life in ways you’d never expect. When your baby cries, you learn the right way to hold them and calm their fears. And when your baby accomplishes a new feat – even something as simple as rolling over – you get to celebrate right along with them.
Of course, becoming a parent isn’t all sunshine and rainbows. In addition to the fun times, there are plenty of real responsibilities to take care of, too. After all, your baby won’t stay small forever. One day, he or she will go to grade school, play sports, and make friends. And before you know it, they’ll fly the coop to attend college and build a life of their own.
Until that day comes, it’s up to you to make the right decisions so you can provide for your family. Even if that means planning for how to protect them financially in the event you were no longer around.
What New Parents Need to Know About Life Insurance
While buying a life insurance policy might feel overwhelming, it’s really not. Or, at least, it doesn’t need to be overwhelming. The process has seen some pretty significant improvements and streamlining in recent years. For example, with Haven Life, you could fill out an application entirely online in minutes and receive an instant decision on coverage. Some qualified, healthy applicants between 18-45 won’t even need to take a medical exam.
This should come as very welcome news to parents, who by nature are busy (putting it mildly). Removing the waiting and confusion from life insurance means you now have even fewer reasons to put off purchasing a very necessary product.
But before you take the plunge on a policy of your own, there are certain things you should consider when deciding on a proper coverage amount.
Kids are Expensive to Raise
According to an ongoing analysis from the U.S. Department of Agriculture, the costs of raising one child to 18 years old surged to $233,610 in 2015. This amount considers basics like housing, food, education, and daycare, along with the fact that child-rearing expenses tend to rise with age. Keep in mind, that amount can vary drastically depending on where you live and how frugal or not your lifestyle is.
Ask yourself this simple question: could your spouse or partner handle all of the child-related expenses if you were suddenly gone tomorrow? For most people, the answer is no.
This is where life insurance coverage becomes so important. It can help ensure your partner can financially care for the children if you were no longer around. In exchange for your monthly premium payment for a term life insurance policy, the life insurance company pays out a death benefit (in the amount of the coverage you purchased) that your beneficiary can use to help cover the bills.
Of course, calculating all the expenses associated with raising children can be tricky. You can use a free online life insurance calculator to help you sort through all the costs associated with your family’s future to give you a recommendation for coverage.
Don’t Forget About College
We already mentioned how expensive raising a child to the age of 18 can be. But, the daily costs of food and shelter don’t always end when your child leaves high school.
If you plan to pay for your child’s higher education, then you should factor in the cost of college when you buy life insurance. (The aforementioned life insurance calculator does this, too, by the way.)
For the 2016-2017 school year, average tuition at a public, in-state university was $9,650 per year. At a private, non-profit school, average tuition worked out to $33,480. These costs are only expected to surge in the future.
With enough life insurance coverage, you could help your kids pay tuition and avoid the stifling levels of student debt so many of today’s young adults face.
Stay-at-Home Parents are Very Valuable
Many assume a life insurance policy for a stay-at-home-parent isn’t needed because they don’t earn a “salary.” This isn’t the case.
Stay-at-home parents may not bring in a paycheck, but consider all they do for the household. Most stay-at-home parents shuttle kids around, cook and clean, help kids with homework, do laundry and dishes, and make most meals for the family – and that’s just the bare minimum.
According to an annual survey from Salary.com, if you add up a stay-at-home parent’s responsibilities, they would make about $143,102 for the 92 hours of work they do each week.
It’s imperative that you consider how/if the surviving spouse could afford to maintain all of that work. Often, that means paying for daycare and household help. While parents are irreplaceable, the proceeds of a life insurance policy can be used to help bridge the financial gap and pay for this type of support.
Employer-Provided Life Insurance Usually Isn’t Enough
Employer-provided life insurance is a great work perk. However, it usually leaves parents underinsured and potentially without coverage when they switch jobs.
Most employer-provided policies only offer coverage that’s 1 or 2 times your annual salary. You can usually purchase more coverage if you want, but it’s at a “group rate.” This means you often don’t benefit from the rates you’d get as a young, healthy new parent like you would with an individual life insurance policy.
Additionally, life insurance should go where you go. Many employer-provided policies are not portable, and if you have that option, it’ll cost you more.
Your best bet is to get an individual life insurance policy while you’re young and healthy that’s around five to 10 times your annual income.
Buying Life Insurance Isn’t a One-Shot Deal
As a new parent, there may still be many unknowns in your future and overall earning potential and expenses. Perhaps you’re just getting started in a new career – or maybe you plan to head back to school to earn an advanced degree. Maybe you’re renting a home but plan to buy soon.
How can you tell how much life insurance you require when your income and circumstances are bound to change?
Here’s something to remember: buying life insurance isn’t something you’re locked into doing just once. Remember to revisit your life insurance needs as your lifestyle changes and your family grows.
Keep in mind that, when it comes to life insurance, something is definitely better than nothing. However, a policy with a sufficient term length and coverage amount can help ensure adequate financial protection.
Life Insurance Costs Less Than You Think
With the price tag for children climbing each year, you may believe that you can’t afford life insurance coverage. Think again. Across the board, term life insurance policies are a lot more affordable than most people realize. And if you buy while you’re young and healthy, you can lock in a low rate.
As part of your financial backup plan, term life insurance is one of the most budget- friendly options. For the price of a single meal out each month, you can potentially protect your family with hundreds of thousands of dollars in coverage.
Determining How Much Coverage You Need
Life insurance is a very personal product, and thus, every family needs a different and specific amount. Factors like your health, salary, debts, and where you live impact how much insurance is right for you. A free online life insurance calculator can help you confidently (and quickly) figure out how much coverage you need. No guesswork or air math required.
As a parent, you know all about the unexpected. You deal with it every day (and sometimes in the middle of the night).
Term life insurance offers peace of mind in knowing that your loved ones are financially protected. Now there’s something big you can check off that seemingly infinite to-do list.