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Becoming a parent for the first time is one of life’s great joys, but it also means a lot of new responsibility. Life insurance can help you make sure your family is taken care of if anything ever happens to you.
Think of life insurance as a contract — as long as you pay your premiums, your life insurance company will pay out your beneficiaries when you die.
There are two main types of policies to choose from:
To figure out how much coverage you and your family need, consider the following:
Add up the value of those things, and aim to take out a policy to match.
There are several factors that affect the cost of life insurance, including:
A good way to ensure your life insurance is affordable is to review it regularly as your situation changes. For instance, as your child gets older and you pay off more of your mortgage, you might need less coverage. You can talk with your insurer about lowering your benefits — and your premiums. You might also want to look in decreasing term life insurance, which is designed to drop off over time in line with your financial obligations.
Whether or not you and your partner both need coverage depends on your personal situation. If both parents earn an income, then protecting those incomes is definitely worth considering. But if one of you earns significantly less than the other, and you could easily get by without that income, consider whether insurance is worth the monthly premium costs.
While stay-at-home parents may not receive a paycheck as such, they play an essential role in running the household. Their duties may include cooking, cleaning and driving the kids around — all valuable things that your family will need to hire someone else to help with if you die unexpectedly or suffer a serious health problem.
In that case, a stay-at-home moms life insurance policy can protect your family financially when you’re gone. It can help them cover their expenses, such as:
When you buy life insurance with a death benefit, you’ll need to name a beneficiary to receive the money when you die. For most people, this means their spouse or partner.
If you decide to nominate a young child as a beneficiary, they will be entitled to access the life insurance benefit when they reach 18 years old— or 21 in some states. Until they’re of age, their custodian will be able to access the money to provide for their care. You can also name your chosen guardian as the beneficiary of the life insurance payout — or even divide up the benefit between multiple beneficiaries.
If you’re worried that 18 or 21 is too young for your children to sensibly manage the money they receive, you can set up a trust with guidelines for when and how they’ll receive the money.
Seek independent legal advice for more information on the best way to structure your life insurance benefit payment.
Hopefully you’ll be there to support your children well into their adult lives. But if something does happen to you, life insurance can make sure they’re provided for. Compare life insurance companies to find a policy that fits your needs and budget.
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