Why parents need life insurance

Both parents should consider buying life insurance, not just the one who earns the bigger paycheck. Even stay at home parents should consider life insurance.

The parent who stays home is equally important to consider including because they care for the child, and the spouse who survives would want to have the ability to pay for this care. A life insurance policy could help the surviving spouse to have the ability to take some time off if necessary.

Parents with younger kids

Kids, particularly at a young age, might depend on you for years. You might want to save for their college tuition or any other expenses they might need.

Couples (Married or Unmarried)

If you pay a mortgage that requires both of the partners’ salaries to afford the mortgage or even if one partner earns more to support your current lifestyle, a life insurance policy will make sure that you both are covered.

How life insurance policies are structured

Life insurance will pay a specific dollar amount to a beneficiary when the person who holds the policy passes away. You choose the beneficiary when you purchase a new policy.

For example, let’s say you purchase a $500,000 policy and have your husband or wife as your beneficiary. If you pass away and the policy is still active, the spouse would receive the payout of $5,000,000. This money can help you pay your home mortgage or even save up for your children’s college education.

Naming beneficiaries

When you purchase a new life insurance policy, you want to choose your spouse or another adult who might care for your children as the beneficiary. You don’t want to leave the policy in your younger children’s name if you would like the benefit to go directly to them. If you name a beneficiary who happens to be a minor and you pass away, the life insurance provider will not pay you the benefit and will wait until the court appoints a legal guardian.

Life Insurance Policies

There are basically two kinds of life insurance offered:  

Term life insurance

A term life policy is also known as temporary life insurance because it has a specific time period. It really is the more affordable life insurance, and you can purchase a substantial amount of coverage at a reasonable price. You can choose a policy over a designated time period that can be anywhere from ten to forty years.  

If you pass away within the period, the life insurance policy will pay the named beneficiary. The coverage will end when the period is over. However, if you are still alive when the period ends, the policy doesn’t pay you anything.

Permanent life insurance

A permanent life insurance policy will last your whole life and is on the more expensive end. It will pay out the beneficiary whenever you die. There are many different types of permanent life insurance policies, including variable universal life, whole life, indexed universal life as well as just basic universal life.

For most families, term life insurance should be enough to create a financial safety net if something were to occur. And most term policies can be converted into long term, permanent policies.  

Final Thoughts

Think about what type of life insurance coverage you want as a new parent. It would help if you considered buying a policy that will cover the years that you are building up your equity and savings and have the costs of raising a child included.

There are many reputable life insurance companies, and if you get a few quotes and talk to some various providers, you should be able to find the right life insurance for you and your family.

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