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Best life insurance for new parents
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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 may be planning for the future. Even though it may be a tough conversation to have, you might want to consider how to financially care for your child if you and/or your spouse were to pass away unexpectedly. For some families, 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. Researching your options with Bankrate may help you find the best life insurance for new parents.
What type of life insurance is recommended for new parents?
There are two main types of life insurance — term and permanent life insurance. Each type has potential pros and cons for new parents. Doing research may help you find the best type of life insurance for your individual needs.
Term life insurance
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 life 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 or college.
Term life insurance is typically much cheaper than permanent life insurance. The downside is that once the term runs out, you will no longer have any life insurance unless you have a convertible policy, and renewing the term can be costly. There are several instances when term life insurance policies might benefit new parents.
When a term life policy might be a good option for you:
- You know you only want coverage for a set period of time. If you know you will not want life insurance coverage after you pay off your mortgage or send your kids to college, then term life insurance may make sense for you.
- You're a young and healthy new parent: Life insurance is typically cheaper the younger and healthier you are, so purchasing a policy now could save you money in the long run.
- You have an alternative retirement and inheritance plan in place. If you are younger and plan to invest in your retirement and inheritance during your working years, you may not need life insurance in place after the policy term has ended. Working with a licensed financial professional may help you figure out how to best allocate your money based on your financial goals.
Permanent life insurance
Permanent life insurance offers coverage until the name insured dies, given that the terms of the policy are met and premiums are paid. There are several different types of permanent life insurance, including universal life, final expense life and whole life. On top of the death benefit, a whole life policy can accumulate cash value from premium payments that may be withdrawn or loaned to the insured. Additionally, once a policy is purchased, your rate is locked in for the policy’s life. However, because this policy is designed to provide a payout as long as premiums are paid, it is usually more expensive.
When whole life might be a good option for you:
- You want coverage for your entire life. If you think you will need life insurance longer than a specified term, it may be best to lock in your premium rate before you get older or develop any health conditions that could make your premium more expensive.
- You're interested in a more complex policy that provides additional benefits. If you want a life insurance policy with a cash value component you could use to further your financial goals, permanent life insurance may be best for you.
- You are the primary source of income for your family. If you plan to be the long-term primary source of income for your family, you might consider permanent life insurance to provide financial stability for your spouse if you pass away before them.
Best life insurance companies for new parents
When you are ready to purchase a policy, you’ll likely be on the hunt for the right life insurance company for you and your family. Most life insurance companies will offer you similar premiums for the same policy type, so analyzing factors such as customer reviews, policies offered and consumer ratings may help you determine which are the best life insurance companies for you. Here are a few national providers that we think may be worth considering based on our analysis of customer satisfaction, coverage types, financial strength and digital tools.
|Company||Best for...||Life insurance policy highlights|
|MassMutual||Digital tools||Highest possible AM Best financial strength rating Robust digital tools|
|State Farm||Term life insurance||Highly-rated customer service, according to J.D. Power Also offers home and auto insurance|
|Guardian||Policy customization||Highest-possible AM Best financial strength rating Wide variety of policy types and terms|
MassMutual is our 2023 Bankrate Award winner for best whole life insurance company. The carrier scored highly in the 2022 U.S. Individual Life Insurance Study, which indicates customers are generally happy with the level of service. MassMutual's policies are also highly customizable with a long list of potential riders, including waiver of premium, accelerated death benefit and guaranteed insurability, which may appeal to parents interested in purchasing a life insurance policy for children. MassMutual has a robust mobile app, which may appeal to customers who prefer to manage their policy digitally, but it does not offer online quotes.
Read full MassMutual Insurance review
State Farm is our 2023 Bankrate Award winner for best term life insurance, which may appeal to new parents seeking coverage until their children are financially independent. The carrier also offers permanent life insurance options. State Farm earned the highest score in J.D. Power’s Life Insurance Study, so it may be a good option for shoppers who value service. The company offers a few riders for term and permanent life, including waiver of premium and a children's life insurance benefit rider.
Read full State Farm Insurance review
Offering term, whole and universal life insurance policies, Guardian also holds the highest-possible AM Best rating for financial strength of A++ (Superior). Licensed to sell policies in all 50 states and Washington, D.C., Guardian scored well above average with J.D. Power for customer satisfaction. The carrier offers an extensive list of riders for its policyholders to choose from, including a waiver of premium rider and a guaranteed renewability clause. However, the carrier does not have a mobile app and does not offer auto or home insurance, so it may not be the best option for customers who value digital tools or prefer to bundle all their insurance needs with a single company.
Read full Guardian Insurance review
Do new parents need life insurance?
Life insurance may help ensure your spouse or dependents are financially secure in the event you pass away. 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, domestic work, funeral costs and 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 when you're young if you want a policy in place and can afford to do so. 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: Are you the sole or primary provider in your family? If so, you may want to take out a life insurance policy that can provide for your family for the long term. If you primarily perform domestic tasks, you may want to take out a life insurance policy that can help pay for the costs of childcare and household management tasks.
- Your debts: Do you have a mortgage, loans or any other debts looming? If so, you may want to take out a life insurance policy that could pay off these debts so they do not become the responsibility of your spouse or children.
- Long-term expenses for your child: Planning for your child’s future likely includes factoring in large financial expenditures such as college tuition, braces, weddings and more. Life insurance may help ensure these items are paid for even after your death.
- Your end-of-life planning: Funerals can be surprisingly expensive. Life insurance may be one strategy to ensure your end-of-life arrangements are paid for before you pass away. You might even consider final expense insurance.