What’s Better for New Parents — Traditional or No Exam Life Insurance?
As a new parent, it’s only natural to want to give your child the world. Shelter, food, and love are the basics, of course, but there’s something else that is equally as important: Life insurance.
Buying life insurance for yourself is the best gift you can give to your child, since it is the only way to make sure they will be financially protected in the event of a tragedy. Even as life insurance becomes more important with each passing day after the birth of your child, it’s one of those things that can be easily pushed off.
When caring for a newborn, there are so many other immediate tasks that need to be taken care of. But be careful not to fall into the trap of procrastination. Why risk leaving your newly expanded family unprotected?
One of the reasons people push off getting life insurance is because they’re simply not sure which kind to buy, and doing the research can be daunting and time-consuming. There are so many kinds out there, so many companies — how can you know where to begin?
To help you get started, the insurance experts at Sproutt have rounded up some key points that can give you some direction as a new parent seeking life insurance.
How Much Life Insurance Do I Need?
To figure out how much life insurance you need, you need to do some basic calculations. How much does it cost to raise a child? According to the Department of Agriculture (USDA), the average amount of money spent on a child from the day they’re born till the day they turn 18 is $284,570.
Multiply that amount by however many children you have. Add some extra if you plan to put your child/children through college, which in 2019 ranged between $10,116 and $36,801.
Of course, you will also want to take your partner into account — how much do you earn and how long would they need that support for in the event of your passing?
Term Life vs. Whole Life
Term life insurance provides insurance for a specific amount of time, or term, like 5, 10, 20, or 30 years. When the term ends, so does the coverage.
Whole life insurance, on the other hand, lasts the policyholder’s entire lifetime and can also be used as an investment vehicle. Because whole provides more comprehensive coverage, it can be 75% more expensive than term. This is why many new parents choose term insurance.
Only you can determine how long you need it for, but keep in mind that most parents choose a policy that will at least see their kids through college.
Traditional Life Insurance vs. No Exam Life Insurance
Term and whole life insurance come in 2 forms: Traditional and no exam. The former is described above, while the latter is life insurance that you can get without the need to undergo a medical exam.
Many new parents prefer this route, since it’s easier to both apply and be approved for. The entire application process can be done online, which many new mothers like, and the approval process takes just a few days.
The reason it’s not more popular than traditional term life insurance is that it tends to be more expensive. However, many new parents have found great rates here.
Which Parent Needs to Get Life Insurance?
All new parents need life insurance, regardless of whether they are the main breadwinner or a stay-at-home parent. For parents whose salary would be missed in the event that they die, it’s obvious why they need life insurance.
But even parents who don’t earn so much or don’t earn at all still contribute to a family in many ways. Stay-at-home parents are responsible for household chores, childcare in many cases, doing laundry, cooking, pick-up, drop-off, etc. If something happens to that parent and all those things need to be outsourced, the expenses will pile up.
Should Parents Name Young Children as Beneficiaries for Their Life Insurance?
While the main reason parents get life insurance is to protect their children, naming a child as a beneficiary is not usually in their best interest. This is because until that child hits 18, he is a minor, and life insurance companies will withhold the death benefit payout until then.
Therefore, it’s best for married parents to name their spouses as the primary beneficiary. In the event that both die, a legal guardian should be named as a contingent beneficiary.
What Is the Best Time for New Parents to Get Life Insurance?
The earlier you get life insurance the better, and this is true whether you’re a parent or not. The reason is that life insurance rates are based on several factors, and your health is the main one.
The general rule of thumb is that the younger you are, the healthier you are, so that’s the best time to lock in low rates. Even no exam life insurance, which doesn’t require a medical exam, still takes age and certain health factors into account when determining premiums, which means that getting it at a younger age is always better than getting it at an advanced age.
The Bottom Line for New Parents
Whether you opt for traditional life insurance or no exam life insurance, the main point is for your children to be protected. Not only will life insurance provide financial relief in the case of a tragedy, but it will provide you peace of mind while you are alive and well. If you have any questions or need a quote, give us a call.