Life insurance for young families
Having children often prompts young parents to buy life insurance as they recognize the awesome, life-long responsibility they have assumed. Here are some key points:
- Consider covering both spouses – even if one stays at home and is not employed. If the stay-at-home parent dies, the surviving spouse must shoulder all the household responsibilities, including child care costs.
Weigh the costs/benefits of purchasing permanent (whole life) vs. term life insurance.
Whole life insurance policies build cash value and also pay a death benefit. However, they are more expensive. If you can’t afford whole life insurance right now, you may want to consider term life insurance with a conversion option that will let you change to a whole life policy for a fee when you are ready.
- Term life insurance offers a death benefit for a period of time such as 10, 20, or 30 years. For example, you may want coverage during your child-rearing years or while paying off a mortgage. If you have a 30-year mortgage, for example, you may want a 30-year term policy.
- Term life premiums increase as you age. If you buy a 10-year policy, then decide you want another 10-year policy, premiums may increase sharply. You may be better off buying a longer-term policy with level premiums from the outset. You can drop coverage if you decide you don’t need it.
- Some people purchase life insurance for healthy newborn babies because their insurability is high and the premium costs are low. If health issues develop later in life, individuals may not be eligible for life insurance coverage.