Taking care of your children's needs means more than merely providing for them on a day-to-day basis.
Since no one knows what the future holds, preparing for their daily needs in your absence is essential. You can be ready for the possibility of an accident or death with a life insurance policy to provide for your family's future.
Calculating How Much Coverage to BuyYour young children have a whole life in front of them, and in the event of your death or disablement, those needs can continue to be met with life insurance, covering the cost of such things as medical care, child care, housing, daily sustenance (food and clothing), education (if in a private school), college, and more.
You also want to remember the bills—especially if you own a house or are buying one. If you want your spouse and children to maintain the same level of comfort they have now, then the insurance should be enough to pay off the mortgage, cover maintenance costs of your property for several years, and cover the annual property taxes. It should also cover any credit card debt and other loans that you may have.
Your Insurance Needs Drop After the Children Leave HomeAs your children move into their teens, or get ready to go off to college, your needs for life insurance will drop as you won't need as much coverage.
If you want to save money your children can use after they leave home, put the money in an investment instrument such as mutual funds, stocks, Certificate of Deposits, etc. The accrued interest will be considerably higher than what a cash value life insurance policy will earn.
Term Insurance Versus Whole LifeWhen you are young, you can purchase a lot of coverage with term insurance for just a few dollars. The same amount of money will only buy a fraction of an equivalent amount of insurance if you buy whole life. When buying term insurance, make sure that it is convertible to a whole life policy. Without this assurance, you may not be able to get affordable coverage if you drop the term policy.
Term insurance does not earn any cash value, which is one reason it is so cheap. It is insurance without any benefits. The premiums remain level for a set period of years, which could be 1, 5, 10, 20, or 30 years.
Whole life insurance earns cash value, but slowly, and not likely for the first three years. This type of policy could have some value if you should have need funds for an emergency, but if all you need is a savings plan, you will get better interest by investing the money.
Child RidersExpect the cost of a funeral and burial to be around $10,000. Having your children covered in the event of an early death will help ease your mind, knowing that such an occurrence will not destroy your finances. If you save the necessary amount of money after getting the rider, you can drop the coverage.
The word “child” permits natural children, stepchildren, and adopted children to be added to the policy. All children listed on the policy are covered for one set price (a flat fee), but they must be added to the policy when it is purchased.
Buy Life Insurance EarlyTanza Loudenback at BusinessInsider recommends that parents buy life insurance even before any children are born because the younger you are, the less you will pay in monthly premiums. Buying life insurance right away will give you the best rates.
Loudenback also mentions that you may not get the best rate if a woman waits until she is pregnant. Life insurance rates are calculated on presumed health at the time, unless you take a medical exam. If you buy insurance when pregnant, the insurer may permit you to get another medical exam later and recalculate the premiums based on that exam. Taking a medical exam will give you lower rates.
Finding the Best RateIf you are interested in obtaining the best rate, you may want to use a life insurance broker as they can find the best deals for you. Find an independent broker, rather than one who is paid to direct clients to specific insurance companies.
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