If you have kids or are planning a family, life insurance is an essential piece to your family’s financial security. What type to get, how much, and what company to choose are all important factors to consider. This blog attempts to de-mystify some of these questions and help parents make sense of their options.
There are two main types of coverage:
- Permanent, also known as whole life, variable life, or universal life
- Term, or temporary coverage
If you are a parent with children under the age of 18 I highly recommend term coverage. Here is why:
- It is a fraction of the cost of typical whole life coverage
- It is designed to protect the family during the most vulnerable years of child rearing
- It typically offers convertibility at the end of the fixed term
- The premiums do not go up and the coverage does not go down during the fixed term period
- Payouts are almost always tax-free
In short, term is typically best because it offers the most amount of coverage for the least amount of cost while raising kids. Just think what would happen if your spouse had to raise kids without your income? For that reason you don’t want to skimp on coverage! The most common type of term coverage is the 20 year option, a great buy. Other common uses of term coverage include; mortgage protection, key person coverage and income replacement.
Should a husband and wife be on the same plan or different policies?
Husband and wife should be on different policies. The reason why is because on a shared plan one spouse will be primary insured and the second will be an add on or a “rider”. If the main insured passes first then the second insured can then lose coverage altogether.
Should my child have his/her own policy?
The most common and inexpensive way to add a child is as a “rider” to a parent’s plan. So the husband would have a plan and the child would be an add on to his policy, or the mother would have a plan and the child would be an add on. Children generally do not need their own plan.
What company should I choose?
There are many companies out there, but you want to choose one with good financial ratings and longevity. The insurance carriers get graded by AM Best, Moodys, and Standard & Poors. These financial ratings are usually easy to find as well as the company’s longevity.
How much coverage do I need?
That can depend on several factors, but for a parent the main consideration is your current income.
To receive your own free needs analysis and find out what coverage is best for you schedule a no obligation consultation.