What to expect (regarding life insurance) when you are pregnant
Pregnant? Congratulations! If you're about to add a new member to your family, you probably have a lot on your mind. Finances, time off work, introducing other family members to the newborn, and so much more. It's exciting, stressful, and overwhelming all at once. Chances are, thinking about things like life insurance isn't currently on your agenda—especially since it can mean considering the possibility of your own or your partner's death—but it's crucial.
Why? Because when you become a parent for the first time, life insurance provides a guarantee that your dependents and loved ones you leave behind will have a means of financial stability even without your income. This can give you and them a tremendous sense of security. Furthermore, life insurance isn't actually that expensive and it's a relatively simple purchase.
How does life insurance work?
Simply put, life insurance is an insurance policy that you can buy through a separate insurer or even through your workplace. You pay a monthly premium, much like a subscription, to maintain the insurance. When you choose a policy, you select a beneficiary—often your spouse—who will receive an insurance benefit upon your death.
Life insurance isn't just for working people with children. If you're a parent or have people who depend on you financially, you need life insurance. Consider your financial situation. Debt. If you or your spouse were to die, how would you supplement that income? If you're not working but are a full-time caregiver, how would that care be replaced? Life insurance can even provide compensation for replacing childcare with daycare or a nanny—which, without insurance, can quickly become expensive.
Even if you're single, you might want to buy life insurance. If you have debts, you wouldn't want them passed on to your heirs or another family member. This includes credit card debt, student loans, mortgages, and so on.
What kind of life insurance do I need as a new parent?
There are many types of life insurance you can buy, but they can be grouped into two main categories: term life insurance and permanent life insurance. Most young, healthy parents will choose to buy term life insurance, as it is generally more affordable than the alternative. It's also the typical choice because you can buy a term policy for a pre-selected period of time—that is, the period during which your children will be financially dependent (from 18 to 25 years old, more or less)—and the policy's expiration date may be relevant to your situation.
The main difference between the two policies is this: term life insurance only covers you for a specific number of years. Policies can be purchased for periods of 10, 20, or even 30 years. If you die while covered, your beneficiary will receive your death benefit.
Permanent life insurance, on the other hand, is generally more expensive, lasts for your entire life, and upon your death, your beneficiary will receive a payment in addition to a "cash surrender value." During your insurance period, you can borrow against this amount if you wish.
How much does life insurance cost for a new parent?
Life insurance is one of the most affordable types of insurance. You might be surprised at how little it actually costs. The younger you are when you first buy your policy, the lower your rates will be over time. Premiums increase with age, so it's a good idea to buy your plan when you're in your 20s or 30s! As long as you're in good health, your life insurance is unlikely to exceed your budget. You can even expect to pay as little as $100 to $300 per year.
Should I buy my insurance policy before or after the birth of my baby?
If you're about to have a baby, it might be wise to buy life insurance now. Why? Well, it's still fresh in your mind, and there's less to do before having a baby than after you have a newborn. Life insurance before having children can even help you get a lower rate and put in place a financial safety net for all stay-at-home parents. You'll get a better rate, and it will help you start with an emergency plan. Many parents want to leave money for their children and/or spouse, and starting early can help you tremendously when the time comes.
Even after choosing a life insurance plan, you'll want to regularly reassess your policy and your needs. If there are major life changes, such as moving house or having another baby, you'll want to increase your coverage. You can even choose to customize your policy with additional coverage called endorsements. You can add these to any basic policy, as long as you qualify. You should have insurance assessments done as regularly as possible—probably once a year—so that if you're underinsured, there's little waiting time before you get the coverage you need.