One of the most important triggers for needing life insurance is a growing family. Whether you just got married or are expecting a child, you may need to check on your life insurance policy.
You should periodically review your homeowner’s policy for two primary reasons.
- A growing family generally accumulates increasing amounts of personal belongings. Think of each child’s toys, clothes, electronic equipment, etc. Moreover, household income tends to rise during this time, which means your worth is growing as well.
- The second reason is that the costs of rebuilding may have risen over time, necessitating an increase in insurance coverage. If something unfortunate were to happen, you want to have peace of mind that you can cover emergency expenses.
With your first child, be sure to change your health care coverage to a family plan. If you and your spouse have retained separate plans, you may want to evaluate which plan has a better cost-benefit profile. Consider consolidating this into one family plan.
If your family is likely to suffer economically because of the loss of one spouse’s income, then disability insurance serves an important role in replacing income that may allow you to meet living expenses without depleting savings.
The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
If you already have disability insurance, consider increasing the income replacement benefit since your income and standard of living may now be higher than when you bought the policy.
With children, the amount of future financial obligations increases. The cost of raising children and funding their college education can be expensive. Should one of the spouses die, the loss of income might severely limit the future quality of life for your surviving children and spouse. Not only does death eliminate the future income of one spouse permanently, but the future earning power of the surviving spouse might be diminished as single parenthood may necessitate fewer working hours and turning down promotions.
Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
Some couples decide to have one parent stay at home to care for the children full time. The economic value of the stay-at-home parent is frequently overlooked. Should the stay-at-home parent die, the surviving parent would likely need to pay for a range of household and child-care services and potentially suffer the loss of future income due to the demands of single parenthood.
The earlier you consider extended-care choices the better. However, the financial demands of more immediate priorities, like saving for your children’s college education or your retirement, will take precedence if resources are limited.