Life Insurance Basics for New Parents

Parenting is a responsible take that comes with a great deal of accountability. Every couple's priorities undergo a drastic shift towards caring for their newborn. Securing a child's financial future is one of the major responsibilities of new parents. Among the best ways to achieve this goal is by purchasing adequate life insurance. As a parent the future and dreams of your children lie in your hands. The very thought of passing away and leaving your spouse and children without the resources to lead a successful and productive life is terrifying to say the least. By purchasing adequate life insurance, your children will be able to cope with their daily lives, education, and career, while you can rest at the thought of them being well cared for.

Why New Parents Need Life Insurance

Undoubtedly, life insurance is every new parent's safest investment. To begin with, your children will have the means to pay off pay off expenses and debts, attend college, have access to medical care and remain healthy, thereby maintaining their quality of life. Obviously, a parent's wish is to see their children pursue their dreams and reach the pinnacle of success in their careers. This can only be achieved with adequate financial backing, which is possible through life insurance. Things can easily change for your family if you unexpectedly pass away, giving you more reason to provide for their needs with life insurance. This includes single parents as well.

Once you have made the wise decision to purchase life insurance, you will want to know what your options are and how much you need to buy. More importantly, how much you need to spend on premiums. In addition, you need to be familiar with insurance terms such as 'cash value'.

Types of Life Insurance

There are two types of life insurance for parents namely, term life, and permanent life. The type of insurance you chose will depend on your current financial situation.

Term life insurance is a cheaper option that provides protection for a specific period such as 10, 15, 25 or 30 years. A term life policy provides only life insurance, with no accumulating cash value. Cash value is the amount of cash available on the cancellation of a term life policy, before it becomes payable on maturity or death. A term life insurance policy will pay your beneficiary the policy's current face value. At the end of the term, if you still need life insurance, you will have to shop for a new policy.

Permanent life insurance on the other hand offers protection for your entire life. Premiums are costlier, but on the brighter side, these policies build cash value, leaving your dependents with more money to see them through in the event of your death. If you can manage to pay a higher premium and are in need of more protection, a permanent life insurance policy is the better choice.

How Much Cover Do You Need?

The easiest way to determine how much life insurance you need is to multiply your income by 8. This will give you a fair idea of the coverage you require. Alternatively, you can multiply your income by 6 and then add to it the total expenses on mortgage payments or college fees for the kids. Another method is to add up all your one-time and long term expenses and multiply the total by the number of children you have.

Steps to Buying Life Insurance

You need to determine the type of policy that meets your goals. Don’t forget to consider your financial situation before you narrow down on a policy. The next step is to get life insurance quotes from the top providers. It is easy to accomplish this online. Several websites provide online insurance services with comparison tools to help you choose the right type of insurance. Shopping online is undoubtedly the best way to find affordable life insurance, an important factor for new parents.