Managing a Growing Family
One of the most compelling times to purchase or update your life insurance is when your family is growing. This is true whether you are having your first child or adding more children to your family. While this is an exciting time, it can also be daunting with more responsibility, lifestyle and financial changes, and planning for the future. It’s difficult to imagine your children growing up without you, but it is necessary to plan for the unfathomable to ensure your family has the care they need.
Consider the expenses your family will still have in the wake of your passing, especially if you are the primary income earner. Life insurance is designed to protect against the financial hardships that occur after a family member has died. Life insurance can cover the following:
– Funeral costs, which can be about $10,000
– Pay off existing loans, debts, credits cards, mortgages and more
– Plan for the future, like setting aside funds for college or retirement
– Cover daily living expenses, such as rent or mortgage payments, car payments, childcare costs, groceries, health care, etc.
What Family Members Should Be Insured?
It’s easy to assume that anyone earning an income should be insured; however, even members of the family who do not earn a paycheck still contribute greatly. First, anyone earning an income should be insured accordingly. Second, any parent that stays at home to raise children should also be covered. Consider recent studies that find the salary a stay at home parent would earn, if paid for all their work, would equate to roughly $115,000 annually.
Think off all the additional costs if a stay at home parent were to pass away. Would the primary income earning partner need to take more time off work, hire more childcare services, pay someone to help cook, clean, transport children, and manage other household tasks. Also factor in any outstanding debt a stay at home parent may have and if they would like to leave a legacy, such as fund for college or donations to meaningful causes. If you are a single parent, consider the emotional and financial devastation your children will encounter. Be sure to plan accordingly.
When Should I Buy a Policy?
Short answer: As Soon As Possible. It is best to lock in rates when you are young and healthy. This is when you will get the best coverage at the lowest price. Plus, if you are planning on having children, you’ll want to get coverage before you get pregnant or shortly thereafter. If you are planning to adopt, the same is true. Partly because life is unpredictable and you want to be prepared; and because once your little bundle of joy is in your arms, you’ll barely have time to shower let alone shop around for life insurance.
How Much Life Insurance Do I Need?
Every situation is unique; however, there are some general guidelines you can follow. The typical rule of thumb is to buy enough to replace five to ten times your annual income. If you have an employer sponsored plan, note that these are rarely adequate and you’ll need to buy an additional policy to supplement. To get a more accurate assessment, you can factors specific costs, such as the following:
1. What are your monthly costs on food, clothing, utilities, housing, education, childcare, etc?
2. How are these monthly costs likely to change over the years? For instance, tuition, property taxes, children’s activities, and the like could all drastically increase.
3. How much debt and loans do you have, including credit cards, mortgages, student loans, medical bills, etc.
4. How much do you have saved in retirement accounts, assets and other investments?
You can use our Term Life Insurance Calculator, which can factor all the pertinent costs help find a plan that is right for you and your family.
What Type of Life Insurance is Best for My Family?
Although all situations are unique, term life insurance is usually ideal for young families. It provides the coverage you need for the amount of time you need it. It is far less expensive than alternatives and easy to understand. For a pretty nominal premium, you can obtain coverage amounts of $500,000 – $1,000,000. You only need to maintain the coverage while you have people depending on you. Once your children are self-sufficient and you and your partner are financially secure, you can choose to terminate the policy or convert it to another type. Converting to another type will likely be much easier and more affordable since you’ve maintained your coverage since you were young and healthy.
Starting a family is an incredible step in your life and certainly one of the most fulfilling. As you make this transition and manage your growing family, it is time to consider their future well-being. Learn how easily you can ensure your family is cared for by simply entering your zip code to Get Your Free Quotes. There is no obligation to buy and no personal information is required. Get started today!