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 may 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 can help you find the best life insurance for new parents.
Why do new parents need life insurance?
Life insurance exists to protect your loved ones’ finances in the event of early or unexpected death. In other words, life insurance coverage helps ensure your spouse or dependents can 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, 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 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: 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 domestic tasks such as cooking and cleaning.
- Any current or future debt that your spouse would be solely responsible for paying back: Do you have a mortgage, loans or any other debts looming? If so, you may want to take out a life insurance policy that can protect your loved ones from being crushed by these debts if you were to pass away.
- Long-term expenses for your child: Planning for your child’s future includes factoring in large financial expenditures such as college tuition, braces, weddings and more. Life insurance can help ensure these items are paid for even after your death.
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 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 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:
- 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 in your retirement during your working years so that, when your children are grown, you will not expect to need insurance once your policy has expired.
Permanent life insurance
Permanent life insurance offers coverage that exists until the name insured dies, no matter the age (under most circumstances). 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 the policy’s life. However, because this policy is almost guaranteed to pay out, it is usually more expensive.
When whole life might be a good option for you:
- If you think 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 investment option.
Best life insurance 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 these factors that our team researched:
|Company||Life insurance policy highlights|
|MassMutual||Highest possible AM Best financial strength rating
Offers the most whole life insurance riders on our list, making its policies customizable
|State Farm||Highly-rated customer service, according to J.D. Power
Highest coverage limit on our list
|Nationwide||Easily accessible digital tools
Accessible local agents
MassMutual has the highest possible AM Best rating for financial strength at A++ (Superior). The company offers 13 whole life insurance riders, more than any other company on our list, allowing customers to tailor their policy to their needs. The company’s J.D. Power score for customer satisfaction is well above the industry average, showing that policyholders are generally satisfied with their service. Overall, families with young children may be happy with MassMutual since it offers a wide range of online tools, highly-rated customer service and multiple riders.
State Farm won the highest score in J.D. Power’s 2021 U.S. Individual Life Insurance Study, showing that policyholders are generally happy with State Farm’s service. The company also received the highest possible AM Best financial strength score of A++ (Superior), showing that the company’s ability to pay out claims has been strong. The company offers a few riders for term and permanent life insurance and the highest potential death benefit amount for term life insurance of any company on our list. For families with young children looking for either term or whole life insurance, State Farm might be a great choice.
Nationwide won the second-highest J.D. Power customer satisfaction score for life insurance, demonstrating the high opinion that most policyholders have of this company. Nationwide offers several riders for whole life insurance and a couple of riders for term life insurance. The company offers a suite of digital tools and accessible local agents, which might make it a great choice for families who may be new to life insurance and would like a little extra help.
Frequently asked questions
What is the best life insurance company for you?
The best life insurance company for you depends on your individual needs. First, you may want to talk about your policy needs and preferences with an independent insurance agent or financial advisor. Once you’ve decided what type of policy you want, you can research which companies offer that policy type. From there, you may want to research each company’s financial strength ratings, customer satisfaction scores and customer reviews.
Should I purchase life insurance for my children?
Whether or not to purchase life insurance for your child is a personal decision. While child mortality rates in the United States are low, you may want to consider purchasing life insurance to cover funeral expenses if the unthinkable were to happen. Even if your child lives a long and happy life, purchasing life insurance for them can make them more insurable in the future by locking in a low premium rate. That way, if your child were to develop a medical issue in the future, they’d already be paying low insurance rates.
What other types of insurance should I consider buying?
If you haven’t already, you may want to consider purchasing auto insurance. Every state other than New Hampshire and Virginia requires residents to purchase at least a minimum amount of car insurance. In addition to making sure you comply with the law, car insurance can give you the peace of mind that you’ll be financially protected in the event of an accident. You may also want to consider purchasing home insurance, which can help protect your finances in the event of a covered loss or damage to your home.