Becoming a new parent can be both an exciting and terrifying time. Not only does everything in your life change in an instant, but now you have another life to protect. One of the most responsible acts you can take as a new parent is planning for the future. Even though it may be a tough conversation to have, you should consider deciding how to best care for your child if one, or both of you, pass away unexpectedly. Life insurance is a great way to ensure that your child’s future will be financially secure, but knowing what insurance to purchase can be tricky. This guide will provide you a brief overview on the best life insurance for new parents.
What type of life insurance is recommended for new parents?
Life insurance exists to protect the livelihood of your loved ones in the event of an early or unexpected death. In other words, life insurance coverage helps ensure your spouse or dependents are able to maintain the same lifestyle they had while you were living. Although you will likely want to calculate how much coverage you need based on your unique living situation, the purpose of the payout is generally to cover anything from your mortgage payments to future education expenses for your child. However, life insurance can also cover:
- Regular expenses
- Dependent care
- Funeral costs
- Unresolved debt
In most cases, the younger and healthier you are, the more affordable your life insurance will be — which is why most experts recommend you buy life insurance as soon as you decide to start a family. When choosing life insurance policies and coverage amounts, it may help to consider factors such as how heavily your everyday expenses rely on your salary, any current or future debt that your spouse would be solely responsible for paying back, as well as long term expenses for your child, like college tuition.
For example, say you have decided to stay home with the newborn and solely rely on your spouse’s income. If they were to die unexpectedly, how would you afford your everyday expenses? Would you be financially able to pay for childcare if you had to return to work? These considerations will shape what type of policy you need, as well as the policy value.
Types of life insurance for new parents
Life insurance policies can be broken down into two main types — term life and permanent life. Term life insurance is coverage that exists for a specified term limit and will provide a death benefit to the beneficiary if the named insured dies during that term. Term insurance is a popular choice among new parents because it can be purchased for a set number of years (usually up to 30) to cover the length of time it takes to reach certain milestones, such as paying off a mortgage or a child graduating high school.
Term life insurance is also usually more affordable than permanent insurance and the premium will not increase through the length of the term. The downside is that once the term runs out, you will no longer have any life insurance and renewing the term can be costly. There are several instances when term life policies might be beneficial for new parents.
When term life is recommended:
- When a household relies on a single income, new parents may be able to purchase a larger amount of coverage at a lower price.
- If you are younger, you will likely invest into your retirement during your working years so if your children are grown, you will not expect to need insurance once your policy has expired.
Permanent life insurance
Permanent life insurance coverage that exists until the name insured dies, no matter the age. There are several different types of permanent life insurance including universal life (which can include market-influenced variable values), final expense life (which provides coverage exclusively for burial expenses), and whole life. On top of the actual death benefit, a whole life policy can accumulate cash value from premium payments that can be withdrawn or loaned to the insured. Additionally, once a policy is purchased, your rate is locked in for life. However, because this policy is almost guaranteed to pay out, it is usually more expensive.
When whole life is recommended:
- If you imagine that you will need life insurance longer than a specified term, it is best to lock in your premium rate before you get older, or develop any health conditions that could make your premium unaffordable.
- If you have the income and are interested in a more complex policy that provides additional benefits, such as cash value, permanent life insurance may be a good low-risk investment option.
Best life insurance for new parents
When you are ready to purchase a policy, it is imperative to choose the right company. While getting a life insurance quote for new parents can be a great point of comparison, analyzing factors such as customer reviews, policies offered and consumer ratings are other priorities that may help you determine which are the best life insurance companies. Here are a few national providers that may be worth considering on the basis of these factors:
|Company||Life insurance policy highlights|
|MetLife Inc.||Available through many employers
Convenient mobile app
|State Farm||Trusted household name
Get a quote online or in-person
|Guardian||Great online resources for consumers
Received an A++ (Superior) rating from AM Best
MetLife is a familiar and trusted household name for life insurance since they own the majority of the market share. Many employers utilize MetLife, so you may be able to purchase a policy through your workplace. MetLife also provides an excellent mobile app for making premium payments and reviewing policies, which is perfect for busy parents. Additionally, it has received an A+ (Superior) rating on AM Best.
Although State Farm is known best for its reliable auto and homeowner’s insurance, State Farm’s life insurance has an overall positive consumer rating, receiving 808 out of 1,000 points from J.D. Power in 2019. There are many life insurance policy types available and it is easy to get a quote online. However, if you are someone who likes to sit down and speak to a professional, there are State Farm offices all over the country making it easy to discuss your options. As a bonus, if you are already a customer, you may be eligible for new discounts on your other insurance policies, which may be ideal for new parents who are on a budget.
Guardian may offer the best life insurance policy for busy new parents due to its convenient online approach to purchasing coverage. On the website, you will find calculators and other resources to help you learn about the different policies available. Plus, it is easy to get a comprehensive quote for your specific life stage. Guardian also has very positive customer reviews and received an A++ (Superior) rating from AM Best in 2020.
Why life insurance matters for new families
Life can get crazy when a baby is born, so finding the best life insurance for parents is one of those tasks that you might never get around to finishing if you do not start the process early on. Unfortunately, tragedies can occur without warning, so no matter what type of coverage you need, new parents should consider purchasing a policy sooner rather than later. Once your policies are purchased, you may have better peace of mind knowing you took the necessary steps to protect your family’s financial future.