Life insurance for parents

Becoming a parent is the start of a journey filled with love and joy — and responsibility. Life insurance can help with that by taking some of the worry off your plate so you can truly enjoy every moment with your child, both big and small.

As sleepless nights and the pitter-patter of tiny feet become a part of your daily routine, it's a great time to familiarize yourself with life insurance: what it is, how it works, and why exploring this protection could be one of the most important parenting decisions you can make.

Why new parents should buy life insurance

In simple terms, life insurance is a contract between you and an insurance company. You can buy life insurance online. Once your policy is active, you pay a premium — monthly, semiannually or annually — and in return, the insurance provider promises a lump sum, or death benefit, to your beneficiaries upon your passing. For new parents, this financial shield offers solace that in the absence of a parent, the benefit can sustain the family's financial needs, provide for mortgage payments, and even fund your child’s future.

What are the best types of life insurance for new parents?

There are several types of life insurance policies, each with different terms that can support your family’s unique needs.

Term life insurance

Term life insurance allows you to purchase coverage that lasts for a specific number of years. This usually means more affordable monthly payments for more coverage since the policy is active only for a limited period of time. For new parents, this can mean a policy structured to support your children until they are 18.

Permanent life insurance

In contrast to term life, permanent life insurance offers lifetime coverage and often builds cash value over time. It can double as a financial planning tool, potentially offering a source of loans, and it guarantees a death benefit. However, permanent life insurance can be more expensive than term life insurance because it offers more comprehensive coverage and cash value in addition to other benefits.

Group life insurance

Group life insurance, typically offered through employers, can be an excellent starting point for new parents. It's often more accessible due to group purchasing and may come with employer contributions. However, the coverage might be limited, and its dependence on your employer may not offer the lifelong security you want for your family members.

Who should be the beneficiary of your life insurance policy?

Selecting a beneficiary is an important decision that requires careful consideration. Although you are purchasing coverage to protect your child, you may not want to name them as your beneficiary because the issuing company cannot pay out to minors. That’s why naming a spouse, co-parent or trusted individual as a beneficiary may be a better option. Naming a guardian for a minor child or establishing a trust can ensure that the financial cover endures until your child reaches adulthood, graduates college or achieves other milestones aligned with your parental plan.

When to consider buying life insurance

Securing a policy early not only locks in lower premiums, reflecting your younger, healthier status but also safeguards your family members from unforeseen health complications that may arise later in life. It’s best for your policy to start before your baby is born; however, if that’s not possible, it’s still more affordable to purchase coverage sooner rather than later.

How much life insurance should you buy as a parent?

When you’re deciding how much life insurance to purchase, it’s important to evaluate your financial obligations, such as outstanding debts and mortgage. You’ll need to factor in your income and consider long-term savings goals and college funds when determining the right policy amount. Additionally, you’ll need to think about how many years of your income you’d like to replace when you are no longer here. You may want coverage to last until your child reaches a certain age.

Prepare for your next chapter with a life insurance policy

In the whirlwind of becoming a parent, it's easy to miss the importance of purchasing life insurance. However, a solid policy from a provider you can trust offers reassurance for you and your family members. And waiting to buy coverage could come at a cost to both you and your loved ones.