Do New Parents Need Life Insurance? 5 Things to Know
Becoming a first-time parent is one of the most exciting and scary times in an individual’s life. From the moment you first find out you are expecting, there are so many changes! During this time, it is also important to consider purchasing a life insurance policy to protect your growing family.
Life insurance policies help protect your family in case of death and provide financial peace of mind for families. Of course, no one wants to think about death in life, but we must be prepared for the worst. National Educational Services has drafted a list of the top 5 things to consider before purchasing a life insurance policy.
1. Understand the Difference Between Whole Life Insurance and Term Life Insurance
As a general rule of thumb, there are two different types of life insurance: whole life insurance and term life insurance.
Whole life insurance, also known as permanent insurance, covers the life insurance policyholder for the entirety of their life. These premiums tend to be more expensive than those for term life insurance, but many of the funds go into a tax-deferred savings account which can be accessed at any time.
Experts tend to recommend that younger individuals avoid these life insurance policies, as they are very expensive and can take a decent amount of time for the cash value to accumulate. For young families, it is a better idea to take advantage of the cheaper term life insurance policies.
Secondly, there are also term life insurance policies, which provide coverage for a specific period of time. If you pass away during the period of coverage in which your policy is active, then your beneficiaries will receive dividends in which the amount you are insured. If your policy expires while you are still alive, you must renew the plan.
Term life insurance is recommended for younger families, as it covers the policyholder for a specific time period and is much cheaper than whole life insurance policies.
2. Determine Priorities in Terms of Coverage
After deciding which type of life insurance is right for you, you must then decide what your coverage priorities are. You can approach this subject in two main ways by evaluating your family’s main expenses in the next few years or you can go ahead and purchase the plan.
Many financial experts recommend individuals to have a specific goal planned for each policy, as this will allow you to determine your priorities and how much coverage you will need for each item.
3. Purchase Life Insurance at a Young Age
Life insurance policy pricing is based on your age and health. If you make the decision to purchase a policy while you are in your 20’s, it will be much cheaper than if you were to purchase in your 40’s. if you are young and healthy, you should consider purchasing a life insurance policy now, as your medical situation can change at any time and a medical diagnosis can make you ineligible from obtaining life insurance later in life.
4. Make Sure Both Parents Are Covered Through Life Insurance
No matter the dynamic of your family, both parents should be covered through life insurance. Numerous families only pay to cover the spouse with the paying job, and this can be a very costly mistake. Families should consider purchasing life insurance for both parents as if either one passes away the life insurance can help cover the cost of child-care and other home services.
5. Speak With an Expert
Purchasing a life insurance policy is very important and it can be very confusing at the same time.
It is so important to reach out to an expert at National Educational Services in order to determine your family’s specific needs and wants.
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