Welcoming a new baby into your family can bring with it unprecedented joy and excitement. It can also be a pretty overwhelming experience, especially for first-time parents. And, with all the decisions to make and options to consider – everything from what to feed your infant and how to diaper them to which stroller to choose and which car seat strikes the best balance of safety and affordability – life insurance is likely to be the last thing on your blissed-out, sleep-deprived mind.
It’s very possible obtaining a life insurance policy is something you’ve never spared a thought for in the past. But, as veteran parents will be quick to tell you, having a child changes everything. You’ll want to do whatever is within your power to protect your little one, and having life insurance coverage in place is a key step you can take to make sure they’re cared for no matter what.
Some Things to Keep in Mind
Both parents should have coverage
While the amount of life insurance coverage each parent elects to have can vary based on their income, outstanding debt, and a variety of other circumstances, it’s important that both of a child’s parents are covered. Even if one parent doesn’t bring in an income, they may still be playing a valuable role in their family’s livelihood, as in the case of a stay-at-home parent who’s caring for their child.
If the parent who’s taking care of a child while another parent is working outside the home were to unexpectedly pass away, the remaining parent may need to either begin paying for childcare so that they can continue working, or potentially take time off of work until alternative childcare arrangements can be put in place. Make sure to include the estimated monetary value of unpaid services each parent provides for their child in your calculations of how much life insurance you’ll need to purchase.
Look toward the future
Imagining your child’s life decades down the road can seem daunting when you’re lost in the weeds of caring for an infant, but you’ll need to look ahead to be sure you’re choosing the right amount of life insurance coverage. For how many years would you want to be certain your child’s financial needs would be met? Would you want to know for sure that expenses associated with your child attending college or trade school would be covered? If you’re a homeowner, would it be important to you that your mortgage could be paid off quickly to ensure your child would have a place to live as long as they need it and a potential financial asset later in life? Your baby may demand your immediate and undivided attention right now, but try not to let that distract you from the bigger picture when it comes to life insurance needs.
Choose beneficiaries wisely
Your goal in purchasing life insurance may be to provide for your child in your absence, but naming a young child as the beneficiary of your life insurance coverage – the person designated to receive the payout from your policy – isn’t advised. Typically, parents may choose their spouse, significant other, or another trusted adult friend or family member, as the beneficiary to their life insurance policy.
In the event that a child is left with no living parents, an insurance company can’t disperse funds to them until a legal guardian has been named. Another option to consider in order to plan for all possible outcomes is to establish a life insurance trust. The trust can be named as the beneficiary, and another adult can be designated as a trustee to manage the trust per your instructions until your child comes of age.
We’re here to help!
Taking good care of people is what the knowledgeable, compassionate agents at O’Brien Insurance do day in and day out. We can help you to make sure your family is taken care of in any circumstances, and we can guide you through the process of procuring life insurance from start to finish. Contact us today!