What you need to know about life insurance as new parent.
If you’re a new parent, life is going to be pretty hectic. Between sleepless nights, constant feeding and changing nappies, who actually has the time to think about life insurance?
However, with a new family to consider, life insurance is more important than ever before. Having a safety net in place, will give you peace of mind that if something were to happen to you, your family would remain financially secure.
If you’ve never looked into life insurance before then it could be a little daunting knowing where to start. We’ve covered the key aspects you need to know as a new parent below.
When should I start thinking about life insurance?
There is no time like the present to buy life insurance. Life insurance is generally cheaper the younger you are, so for every year you delay, you should expect to pay more for your policy.
If you are planning to have a child in the next few years
If you are thinking about starting a family in the future, there is nothing to stop you from buying a policy now. It’s always good to think ahead, and if you already have it in place, that’s one less thing to think about once you’re preoccupied with a newborn.
You are currently pregnant
You can still apply for life cover whilst you are pregnant, however your premium will depend on your individual circumstances. Some pregnancies may come with medical complications, such as gestational diabetes for example, and this may increase your rate.
You are going through the adoption process
The adoption process can take several weeks or months so it may be worth sorting out life insurance during this time, rather than waiting until it is all complete. This way your child will be financially protected from the moment they become part of your family.
How much life insurance will you need as a new parent?
There is no doubt about it, children are expensive! Each family is unique so the amount of cover will vary depending on your circumstances.
You’ll certainly want your life insurance to cover the loss of your income as a basic level. As a sole parent, your spouse or partner may need to cover additional childcare costs, they may also need to cover rent or mortgage costs and of course, there will be funeral expenses to take care of. You’ll also need to consider the cost of inflation too, if a claim is made well into the future.
Should both parents have a life insurance policy?
It’s a common misconception that the main breadwinner of the family is the only one that needs life insurance. Of course, if something happens to them, then having a source of money to replace their income can be a huge help during an already stressful time.
But there is also a huge financial impact if a stay-at-home parent dies. As the primary carer for the children, they will also perform many other jobs around the home, such as cooking and cleaning. The surviving partner may need to pay to replace these services, such as sending a child to nursery or hiring a cleaner. This can be expensive, so having an insurance policy in place that can cover this can be extremely helpful.
If both of you are planning to buy life insurance, there are two options to consider. You can either buy two separate policies or you could get a joint policy. A joint policy is usually cheaper, however this would only pay out on the first death. If the surviving partner wanted to have life cover remaining in place for the children’s benefit, they would need to take out a brand new policy. This could be much more expensive if the insured is now older. Two separate policies may make more financial sense in the long-term.
Can I name my children as beneficiaries?
A beneficiary is the person (or persons) who will receive the benefit from your policy. Usually, people name their spouse/partner as the main beneficiary, as they will be the ones who will be looking after the finances following your death. However you can also name your children as co-beneficiaries to ensure that the payout is for their benefit.
If you are divorced, you can name your child or children as the sole beneficiaries. However, life insurance payouts can not usually be issued directly to anyone under the age of 16. In this case, the payout would be kept in trust for them to access once they are of legal age to do so.
Losing a spouse or a parent is a tragedy, but life insurance will ensure that financial stresses do not add to the terrible situation. Speak to one of our life insurance specialists today to find a policy that is right for your family.