What New Parents Need to Know About Life Insurance
By Pekin Insurance · Aug 27, 2020 ·2 min read
How much does it cost to raise a child through age 17? About $285,000 with inflation factored in, according to the U.S. Department of Agriculture.
That number could make you say, “You see! Kids are expensive. That’s why we haven’t bought life insurance.”
Think about it this way: the right life insurance plan could cover you for $285,000 (or more) at a price you can afford. Here’s what new parents need to know about life insurance.
Life Insurance Isn’t as Expensive as You Think It Is
This topic isn’t exclusive to new parents. But nearly half of millennials overestimate the cost of life insurance by 500%.
After you contact a Pekin Insurance agent, they’ll give you a free life insurance quote and find a plan for your budget.
Life Insurance Costs Less When You’re Young and Healthy
Life insurance rates go up as you age. It makes sense for new parents to lock in rates while they’re younger and healthier.
Life Insurance Is Versatile
If you’re not there to support your loved ones, life insurance can take care of:
- House payments.
- Home maintenance.
- Car payments.
- College tuition.
- School supplies.
- And more!
Life Insurance Can Pay for Childcare
According to care.com, average weekly childcare costs are:
- $215 for a daycare.
- $201 for a family care center.
- $565 for a nanny.
If one parent leaves the picture, the other parent will probably need one of these services.
Your Employer’s Life Insurance Might Not Be Enough
Does your employer offer a limited amount of life insurance, possibly one or two times your salary? Is that enough coverage?
Think about these average costs:
- Monthly mortgage: $1,500.
- Yearly college tuition and fees: $10,000 at public colleges (in-state residents), $26,820 at public colleges (out-of-state residents), $36,880 at private colleges.
- Monthly car payment: $360.
The truth is, employers don’t always offer enough life insurance. Plus, you might not be able to take your life insurance with you if you leave your current job.
Both Parents Could Need Life Insurance
There’s a misconception that only “breadwinners” should have life insurance. Stay-at-home parents need it, too!
According to salary.com, a stay-at-home mom would earn a $178,201 salary if she received a paycheck for her efforts. Keep in mind this is a statistical projection. You can apply this estimate to stay-at-home fathers, too.
The $178,201 amount reflects the roles filled by a stay-at-home parent:
- Academic advisor.
- Facilities director.
- Laundry manager.
Are you or your partner a stay-at-home parent? If so, it might not cost you exactly $178,201 to replace the services listed above. But it wouldn't be cheap by any means.
Decide on Term, Permanent, or a Mix of Both
To weigh your options, it helps to know the difference between term life and permanent life.
What sets these two kinds of life coverages apart?
It’s like the difference between renting (term) and making payments to own (permanent). There’s more to it than that, though.
With term life, you have insurance for a set period of time like 10 years.
Term Life Advantages
- Less expensive than permanent life.
- Payments guaranteed for your contract period.
- Can be converted to permanent life.
Term Life Disadvantages
- Lasts for a limited time unless you convert it to a different kind of policy.
- Might not fit lifelong coverage needs.
Permanent Life Advantages
- Builds tax-deferred cash value.
- Provides lifelong coverage.
- Premiums don’t increase.
- Offers the option of borrowing from the cash value of the policy.
- Doesn’t change with market fluctuation.
Permanent Life Disadvantages
- More expensive than term life.
Transitional life insurance offers a mix of term and permanent coverage. Here’s a quick example to show you how it works.
Josh and Sara are a young couple expecting their first child. With a little one on the way, they have a tight budget.
Josh and Sara expect to pay off their student loans and advance in their careers within a few years. They’re looking for an affordable life insurance plan that offers a paid in full policy at retirement.
Transitional life insurance would work well for Josh and Sara. This policy provides low-cost term insurance now, which would offer financial support for the surviving parent and child. At the end of the term insurance period, transitional life would give Josh and Sara a paid-up policy to cover final expenses.
You want to give your family more financial protection. Do you need help figuring out your life insurance options, though?
Don’t lose sleep over it! Reach out to your local, licensed Pekin Insurance agent to put the right life insurance plan in place.