Life insurance for new parents
Congratulations - you’ve just become parents and started a new family! No doubt your life has been thrown into chaos - perhaps you haven’t brushed your hair however long, you can’t remember what the inside of a bar looks like and you have no idea what day it is. Despite this, in between changing nappies and stealing moments of sleep, you should really be giving some thought into how you’re going to protect this new precious little life of yours.
And I’m sure you’ll have gathered by now after parting with your pennies for a pram, a car seat and all of the other expensive baby necessities, raising a family is not cheap. It’s obviously a horrible thing to consider, but if something were to now happen to you or your partner, how would this impact your little one?
If you haven’t already, it’s time to take out life insurance. It’ll make more sense than ever before now that you’re a new parent. No amount of money could ever replace you or your partner but it can really make a difficult time a little more bearable with one less thing to worry about. It lessens the financial stresses of losing someone that you depend on.
Why is now the time to start thinking about life insurance?
As a general rule, when you don’t have anyone relying on your money to help meet financial commitments, you probably don’t really need to take out life insurance. When you bring children into the world however, a regular steady income is pretty vital to keep life ticking over as normal and/or to set them up for the future.
There’s so many costs that need covering in a family home; food on the table, school uniforms, childcare costs… if anything were to happen to you or your partner, a life insurance payout could make sure that these costs are kept on top of - and the mortgage paid off!
The mortgage is probably the most important thing to consider here. It’s the roof over your family’s heads. The last thing your family are going to want to deal with alongside a death is potentially losing their home because they can’t cover the mortgage payments. If you had to relocate, you may even have to consider pulling the children out of school and away from their friends, causing even more disruption to their lives.
Secondly, debts such as loans and credit card bills don’t just disappear when someone passes away - they get passed on. That’s not something that your loved ones want to deal with along with raising the family without you around.
Joint or single life insurance policy?
Convinced? I hope so! If you’re sold on the idea of taking out life insurance, there’s a few things to first consider before you set out finding yourself a policy. Firstly, would you like to take out a joint or single policy? A joint policy does work out cheaper but there can only ever be one payout and one claim. If the worst were to happen and both policy holders were to pass away in a car accident for instance, then your children will only receive one payout. Is that going to be enough?
Perhaps in your family one parent is the breadwinner and one is the primary carer. You might be thinking that it makes sense to take out a single policy for the breadwinner, as their income is relied on most. But what if something were to happen to the carer? The breadwinner might have to work less to be around more for the children, or continue to work but pay more for childcare.
If you can afford it, two single policies is probably preferable as you’ll have double the protection. And if you take out life insurance while you’re young and healthy, you have the benefit of lower monthly premiums than if you were to take it out later in life. All being well, the cost definitely shouldn’t break the bank.
Decreasing term vs level term
You’ll also need to decide whether you want to take out a decreasing term policy or a level term policy. Decreasing term policies are designed to cover a debt that decreases over time, such as your mortgage. Because the potential payout amount decreases over time, then monthly premiums are typically lower for the life of the policy. The final payout might not be big enough to cover many other costs or leave you with a lump sum, but it will be enough to pay the mortgage off so if this is your priority, then a decreasing term policy could be a good option for you.
A level term policy pays the same agreed amount and lasts for the length of time that you choose. If you know your family are going to need financial support for the next 18 years, then you should take out a policy that lasts 18 years. It’ll payout enough to cover the necessary costs and help your children get by until they can stand on their own two feet.
With the arrival of a new family member, there’s an endless list of things to do and think about. But please, consider adding life insurance to that list and bumping it up to the top. It’s not a lengthy process and it’s totally worth it in the long-run!