Chances are, you never seriously thought about life insurance until you became a parent. However, now you and your partner or spouse have more to consider than just building your careers and nights out with the gang — you have a helpless child to feed, clothe, educate, and keep healthy.
According to an ongoing analysis from the U.S. Department of Agriculture, the cost of raising a child is around $233,610 — and that number is thousands of dollars higher when you factor in inflation costs. Would you be able to comfortably cover that if your spouse passed away? Would another guardian be able to take that on if both you and your partner died?
You could risk it, or you could buy life insurance.
- How Life Insurance Works
- Types of Life Insurance
- Buy Life Insurance for Both Parents
- How to Buy a Life Insurance Policy
How Life Insurance Works
Simply put, life insurance policy pays a death benefit (i.e. money) to your beneficiary (for example, your partner or spouse) when you die.
Let’s say you buy a life insurance policy for $250,000 and you name your husband the beneficiary. If you die while the policy is in effect, your husband will receive that $250,000 and use it to take care of any lingering costs and get on with the business of taking care of the family.
For example, your beneficiary can use the payout to cover your remaining medical bills and funeral expenses, pay off a mortgage and car loan, and send your child to college. Your beneficiary might also use the money for everyday expenses like food, clothing, and utilities.
Types of Life Insurance
The two main kinds of life insurance are term life insurance and whole life insurance.
With term life insurance, you get coverage for a specific time period — or, a term, usually up to 30 years. With whole life insurance, you get coverage for life. You could die next week or in 50 years and your beneficiary will still receive the payout.
Buy Life Insurance for Both Parents
Many parents make the mistake of thinking only one parent needs a life insurance policy, especially if one of the parents is a stay-at-home parent.
However, based on the variety of job duties they perform every single day, stay-at-home parents would earn about $178,201 a year if someone was out there writing checks for it (Salary.com’s 2019 Mom Salary Survey.)
Think about it. Many stay-at-home parents provide crucial services employed parents would need to arrange for in their absence, such as:
- Planning and Management.
That’s just the stuff we can neatly categorize — there’s so much more!
Understand that both parents – regardless of employment status – need a life insurance policy.
How to Buy a Life Insurance Policy
Like many other types of insurance, you can shop for life insurance policies online. Be aware though that depending on your age and lifestyle, you might be required to get a medical exam before the deal is finalized.
However, you’ll want to work with a financial advisor and life insurance agent if you’re buying a whole life insurance policy or if you need to take extra steps such as setting up a trust for your child. Typically there are just too many financial and legal balls in motion to handle all that solely on your own.
We go over what to expect when you buy a life insurance policy — as well as how much coverage you need, how to name your beneficiary, how companies price your policy, and more — at How to Buy a Life Insurance Policy.
Once you become a parent, it’s time to buy a life insurance policy — and, the earlier you buy it, the better. Sit down with your partner or spouse and discuss current and future financial needs, as well as your budget and how much of a premium you can afford. Browse quotes online, but talk directly to a financial advisor or life insurance agent if you need extra coverage or legal assistance. Once you purchase your policy, review it every few years or each time you have a life change.