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Investment Advisory Services are offered through Bright Futures Wealth Management and/or Cetera Advisors LLC registered investment advisers.  Securities are offered and sold through Cetera Advisors LLC, - A registered broker dealer. Member FINRA, SIPC. Bright Futures Wealth Management and Cetera Advisors LLC are not associated entities. Cetera is under separate ownership from any other company. Bright Futures Wealth Management is under separate ownership from any other company. Perrotto Private Wealth is under separate ownership.

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4 Questions Expecting Parents Have About Life Insurance

December 18, 2017

 

If you are expecting a child and are considering life insurance, the first thing you should realize is this is a smart move! But if this is your first time looking for coverage, you may have questions. Here are some of the typical ones you most likely are wondering about:

 

The number one question always asked, what type of life insurance coverage is best for new parents, term or permanent? Before figuring out what kind of coverage you need, you first have to understand how much death benefit you need to protect your family. You can do an easy calculation online to get a working idea of how much you may need with this Life Happens Life Insurance Needs Calculator.

 

Then you can move on to what kind of coverage makes the most sense, term or permanent, and which one meets your needs. An advantage of term life insurance is that it costs less than permanent, at least initially. This makes it affordable for young families that may not have a lot of disposable income, but have a large need for coverage. Permanent insurance provides both lifelong coverage and a cash accumulation feature, which can be a valuable source of money that you can tap in the future. Often, the best solution can be a combination of term and permanent life insurance. The term policy can give you extra coverage during the beginning years when the children are at home, and when coverage is cheap, and with the permanent policy offering lifelong coverage that you can tap into in the future.

 

Should you consider different types of coverage if one spouse is a working parent versus a stay-at-home parent? Both working and stay-at-home parents need protection because what they do for their families is so valuable. While a stay-at-home parent isn’t compensated for their work, if something were to happen to them, it would be expensive to replace all those things they do—from childcare to home care to ensuring the family gets where they need to go when they have to be there. The difference between the two is that a working parent also contributes an income, which may be critical to the family financially. That means they needs to think about replacing that income when considering how much life insurance coverage he or she may need.

 

The company where you work offers life insurance, is that enough? Group insurance is a great benefit to have, but it’s limited in a number of ways. First, the coverage is often a lump sum, such as $50,000, or it may be one to two times your salary. That may sound like a lot of money, but the main question to ask yourself is: Honestly, how long would that money last? And what would happen to your family financially after that was gone? Second, when you leave that job, you generally lose that coverage. If you don’t have an individual policy that you own, you’ll be leaving your family at risk. Think of how many times people change jobs, and you’ll quickly realize that group coverage, which is limited in scope and amount, is not a proper life insurance plan.

 

What can I expect to pay for life insurance?  How much you pay for life insurance is based on a number of things but most importantly age and health. So, it depends on how old and how healthy you are! But here’s an example: A healthy 30-year-old woman could get $250,000 in term life insurance coverage (for a 20-year level term policy for a nonsmoker) for around 41 cents a day. That’s offers a certain level of peace of mind for 12 dollars a month. While a permanent life insurance policy is roughly a few hundred a month for the same coverage, it offers cash value, potential for dividends, as well as the ability for life long coverage.

 

These are the main questions asked in my experience with new or expecting parents in regards to life insurance. It’s worth it to either have that peace of mind with term life insurance while the kids are growing up, or build a potential nest egg with permanent life insurance, that gives your family life long coverage. It’s also important to not wait. Waiting only drives the cost up with life insurance. A 55-year-old whose health is in decline is going to pay much more than a 45-year-old in great health. Either way it makes sense to talk to a financial professional about getting coverage for your future family.

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