There’s no denying that your life changes for good when you become a parent. So many exciting milestones lie ahead for both you and your child, and you’ll get the privilege of having a front-row seat as they grow!
While being a new parent is exciting, the feelings that can accompany this new stage of life can also be overwhelming. Protective instincts are kicking in because, as a parent, there is nothing you wouldn’t do to protect your child – physically, emotionally, and even financially.
If you already have life insurance, becoming a parent usually requires different life insurance terms and considerations. Now is the time to consider changing your coverage to make it more conducive to your new circumstances; otherwise, you risk your family being insufficiently protected in the event of a tragedy.
Alternatively, maybe you’re brand new to life insurance and wonder how to get started. If this is the case, then here’s an introductory guide to life insurance coverage as a new parent.
Types of Life Insurance for New Parents
We’ll start things off by clarifying that there is no single “right” insurance policy for new parents. Instead, the policy you select working with your advisor will depend on what is appropriate for your unique circumstances, both financial and otherwise. We’ve listed a few options you might consider below.
Term life insurance gets its name from its coverage; policyholders are covered for a specified amount of time, otherwise known as a “term.” A term policy is a good place to start for those who might not want to jump right into a permanent policy. It is also a life insurance option for supplementing or increasing the value of any existing coverage you might have, as it only lasts as long as you want and usually coincides with specific yet temporary life circumstances.
For new parents, choosing a term can provide coverage for your family until your children become adults, have graduated from college, or become financially independent. This suitability makes term life insurance highly convenient for young parents and families since there are generally no restrictions requiring you to keep the policy longer than necessary – not to mention, term policies are typically more affordable than permanent policies.
Keep in mind that some term life insurance policies can be converted into permanent life insurance policies. You might consider looking into this if you’re approaching the end of your term policy and would like for it to continue indefinitely. Making the transition may be easier than investing in a new policy, but it is worth noting that for the same coverage your premium may be subject to an increase.
As you’ve probably gathered, permanent life insurance is designed to offer coverage spanning a lifetime.
Like a term policy, permanent insurance provides a death benefit, which is a smart way to ensure that your loved ones are covered if you pass away, helping them with mortgage or rent payments, personal debts, and your funeral and final expenses.
Life insurance agents generally recommend taking out a life insurance policy with a death benefit of approximately 7-10 times your annual salary; however, if such a policy is unaffordable or otherwise unsuitable for you, your family can still benefit from a smaller policy.
Permanent life insurance policies also come with a cash value, which you can access during your lifetime. The cash value of permanent life insurance accumulates over time as you make your monthly premium payments, and you can generally borrow against your policy’s cash value if need be.
There are several different types of permanent life insurance you might consider for your growing family. These include options for those in good health with pre-existing conditions and no-medical plans. These forms of permanent life insurance come with specific terms and conditions. It is wise to shop around for the policy that fits your needs.
Having children adds new and different considerations to your existing plan if you already have life insurance. Your coverage might need to be increased to protect them sufficiently.
As you determine whether you should change your current life insurance policy, consider how much money you’d like to leave behind for your children if you pass away. How much coverage would allow them to live comfortably without your income? The answers will vary depending upon their age, whether you pass away before they are legal adults, and whether you’ve planned for them to live with relatives. Couples expecting twins will need to budget a bit extra and likely increase their life insurance coverage.
You also need to factor in specific costs like unique circumstances within your family unit that need special attention if you’ve passed away. For example, let’s say you want to cover your children’s future post-secondary education, or if you want to cover the cost of lifetime care of a disabled child, etc. Your life insurance policy should account for these specifications and you should consider working with an estate lawyer to prepare a will that supports your family goals.
If your current life insurance policy doesn’t provide the coverage amount you need, you can discuss this with your insurance provider.
Becoming a parent is an extraordinary yet often stressful time in life. With so many moving parts to consider for your child and their future, having even a simple life insurance policy in place can give you peace of mind in the event of unforeseen circumstances.
Canada Protection Plan, a Foresters Financial company, offers a wide array of competitively priced and comprehensive Life Insurance (Whole-Life and Term) and Critical Illness Insurance products. Learn more and chat with a Life Insurance Advisor about which insurance products are right for you! Visit cpp.ca.