For many people, having a new baby triggers the thought: I really ought to get some life insurance. One estimate put the lifetime cost of raising a child to age 18 at over $300,000 for a middle-income couple – not including the cost of higher education.1 Is your family ready for that burden if a parent dies? Life insurance can help you protect your young family from the financial aftermath of an unexpected death. If you’re considering buying a life insurance policy or expanding your current coverage, there are a few things you should consider.
- Identify your family’s financial goals
Life insurance is about helping your family live comfortably and accomplish their goals after the death of a parent. Understanding what your family wants to do over the next decades and identifying financial priorities will help you determine the type and amount of insurance you will need. Consider these questions:
- Do we want to pay off the mortgage?
- Cover childcare?
- Take time off from work to grieve?
- Take family vacations?
- Pay for private school or lessons?
- Cover college tuition?
Once you understand the costs that you would like life insurance to cover, you should also think about how your family’s income will increase over time with raises and promotions. Consider your lifetime earning potential and how the absence of that income will affect your family. A professional can help you run the calculations needed to determine how much coverage you should buy.
- Buy a policy early
Since the premium you will pay on an insurance policy depends on factors like your age and health status, you’ll pay less when you’re young and healthy. Delaying could end up costing you more as premiums increase – not to mention the risk of leaving your family unprotected.
- Don’t forget about your spouse
While many families only buy life insurance on the primary earner, it’s very important to consider the contributions both parents make to the household. Even if one parent quit working to care for the family that parent provides valuable work that would have to be replaced in the event of death. Ask questions like:
- How would we cover childcare?
- Who would provide transportation for the child?
- Who would handle the housework?
- Would the surviving parent have to take time off of work?
- Consult a professional
Life insurance is a valuable tool to protect your family from the unexpected. It’s also a critical part of an overall financial strategy. Working with a qualified insurance expert who understands your overall financial situation can help ensure that you are getting the right insurance for your personal needs.