So you are about to have a new little one in your life? Congrats! This is a special time in any families' lives that should be treasured and celebrated. You also need to prepare for your bundle of joy financially the right way. Obviously, friends and family will probably throw you a baby shower to help supply you with some of the important physical items you need when welcoming a new baby, but what about the less obvious methods of preparation, like preparing a last will and testament and securing life insurance?
People don't overly like to think about how your children will be taken care of in the event that something tragic happens to you or your spouse. Take heart. Once you make the proper plans to get life insurance, it's just another step to ensure that your child will be provided for in the future. Here are four life insurance tips to consider when purchasing your family life insurance plan.
Tip #1: Both Parents Needs to Carry Life Insurance Coverage
Even if one of you plans on staying home for a bit or long term with a new baby, both of you need to have separate life insurance policies. Don't underestimate the financial value of the parent that stays home. This is a mistake many couples make when purchasing life insurance. The money will go to supporting the family if one spouse is gone, including child care costs.
Tip #2: Understand the Two Types of Life Insurance
There are two types of life insurance, "term life" and "permanent life." There is a very simple difference. Term life is temporary life insurance coverage that you purchase for a specific amount of time. You likely wouldn't choose this type of plan option if you're just welcoming a new baby to the family. It's likely in your situation with a newborn that you would be interested in a permanent life insurance plan, which will cover your entire future. If you pass away, regardless of your age, you will be covered and the policy will pay out to your beneficiary.
Tip #3: Figure out How Much Coverage You Need
Determining how much life insurance coverage you need is entirely up to you, but ideally, you want the policy to pay out over a few years. Think of that payout as covering household expenses for five years or even more. Plus, you want to add in costs of things like college for your child, or multiple children. This is very important because clearly, you want the family you leave behind to have the best life possible even if you are no longer around. Taking the pressure financially off of your living spouse or the person who will care for your children if you are gone is a great gift to leave to them. There are also many online life insurance calculators that may help you arrive at this number.
Tip #4: Don't Name Your Children as the Beneficiaries
You ideally want to name your living spouse, or in the event that you aren't married, are divorced, or just don't feel like your partner will be up to the task financially, you may want to name a sibling, best friend, or business partner you trust to carry out your financial wishes for your child.
If you have questions about life insurance in general, it's always a good idea to talk to a financial planner to make sure all your needs are squared away. You want to focus on that new life you are bringing into the world and sometimes having some help with life insurance will take a huge weight off your shoulders.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.