Life Insurance & Prepping for Parenthood

Should I Get Life Insurance as a Preparation for Parenthood?

Each year there are more than 3.6 million births in the U.S., according to the U.S. Centers for Disease Control and Prevention. Creating a safety net for your children is especially important for first-time parents. These safety nets include emergency savings, health insurance, and, perhaps most importantly, life insurance.

With a growing family to support, life insurance is one of the most effective and affordable ways to provide financial security for your family. However, many parents, particularly younger parents, may not fully understand how life insurance works.

What Is Life Insurance?

Life insurance is an agreement between a person and the insurance company, where the company obliges to pay out a certain amount to the insurer’s family when they die. Most life insurance policies have a monthly premium to pay, which is often determined by age, health status, and income.

It’s not uncommon for many workplaces to provide access to life insurance benefits and plans. However, many families purchase additional coverage, so it’s helpful that you know how to shop for life insurance before you get started.

Life insurance is a way to guarantee your family is financially secure in the event of your death. As they move forward after such a traumatic loss, they won’t be burdened by financial woes while they navigate their grief. As such, new parents, in particular, must educate themselves on the benefits of life insurance.

Why Do New Parents Need Life Insurance?

As a parent, you may experience plenty of uncertainties and “what-ifs” when you welcome your child into the world. Knowing that your partner and child are provided for in case of an unexpected tragedy can give you some peace of mind.

Life insurance is critical for all parents, whether you stay at home or work. These policies can create financial trusts, fund education, and provide financial security for your family when you are no longer there. It can be an even better investment for parents who do not have a will, as many younger people do not know if writing a will is even necessary.

Reasons a Parent Might Get a Life Insurance Policy on their Child

Many parents — especially first-time parents — do not realize they can also purchase life insurance for their children. While it’s not a common practice, there are many benefits to covering your child with life insurance.

Provides Future Insurability for Your Child

Purchasing life insurance now — when your child is an infant — gives them coverage for their future. This level of future insurability means they can build on this coverage as an adult, making it easier and more affordable for them to sustain their future financial security — for themselves and their children.

Lower Premiums Can Be Locked In

Many parents are drawn to the idea of purchasing life insurance for their children because it locks in those lowers premiums into adulthood. If you or your children are younger when you purchase them, you’ll be able to secure those lower premiums for the long term.

Cash Value of the Policy Grows at a Fixed Rate Over Time

A fixed rate for policy growth is one of the leading reasons a parent might get a life insurance policy for their child. This means that, as adults, they can borrow against their policy for major life milestones, like college tuition or a downpayment on a house.

Many parents consider life insurance for their children because these factors create pricing stability. However, when it comes to getting life insurance for yourself or your loved ones, parents have other important pricing factors to consider, as well.

Life Insurance Pricing Factors

Your life insurance plan’s premiums depend on several factors including age, gender, health, smoking, and hobbies. Understanding how these factors impact your costs can sometimes be confusing, so it’s important to get clarification.

Age

The older you are, the more likely the insurer will have to pay out on your life insurance policy, which is why age impacts costs. Parents who get life insurance early are often able to lock in lower premiums.

Gender

According to Statista, the average life expectancy for women is higher than for men in the U.S. Women, on average, live seven or eight years longer than men, which is why gender can impact your costs and insurance premiums.

Health

Most insurers will require a medical exam before issuing you a policy, which can include blood work, BMI, and medical history. All of these factors can impact your premiums; the healthier you are, the less you pay.

Smokers

Because smoking leads to a vast array of medical conditions — from heart disease to cancer — premiums for smokers are higher than for non-smokers. In addition, smokers can cut their life spans by up to 13 years. Parents with life insurance policies who quit smoking should contact their insurers to see about lowering their premiums.

Hobbies

High-risk hobbies, like sky diving, mountain climbing, and skiing can lead to higher premiums since the likelihood of death is increased. Each insurer categorizes these hobbies differently, so it's important to compare different plans to find the best premium for your lifestyle.

Understanding how your age, gender, health, and hobbies impact your life insurance is just one step parents can take toward maximizing their investment. When it comes to making sure your policy will keep your family financially secure in case of your death, it’s also important to look at the kind of insurance you need.

Term Life Insurance vs. Whole Life Plan

When it comes to life insurance there are two common avenues to consider: term life insurance and whole life plan. There are pros and cons for each of these that are important for new parents to consider before applying for life insurance.

The least expensive of the two options, term life insurance policies will expire after a certain amount of time, often 10, 15, or 30 years. Whole life insurance has substantially higher premiums, but will last as long as you continue to pay your premiums.

Whole life insurance also has some cash value advantages, which allows you to earn interest on your policy. However, that interest is usually small. Most new parents on a budget will find that the lower premiums of a term life insurance policy cover their needs and will keep their family protected in case of an unexpected tragedy.

Single Parent Life Insurance

In general, parents need to consider life insurance to protect their family’s financial future in case of an unexpected death. When you are a single parent, that tragedy can be all the more devastating to your child.

Single parents should consider the steps they need to take to ensure their children have financial stability in case of their death. From covering funeral costs to providing for their education, getting life insurance as a single parent can be one of the greatest gifts you give your child.

All parents want the best for their children. There is a peace of mind that comes with knowing they will be financially supported if tragedy ever hits. Life insurance policies can keep your children safe and secure, even if you are no longer there to protect them yourself.

Looking for the best life insurance policy for you? Explore our top policy providers here.