Whenever a major life event occurs it’s wise to review your insurance coverage, especially when becoming a parent. You want to make sure your family is sufficiently covered, particularly when it comes to life insurance. Life insurance is, after all, intended to guard your loved ones against the unexpected.
If you are currently looking to transition from an individual life policy to one that will cover your expanding family, here are a few things to consider.
Life Changes
Whether you have whole or term life insurance, it’s important to understand that these policies are designed to grow and evolve with you.
As your expenses and life circumstances change, your life insurance agent can help you make the right updates and guide you in the best direction.
Covering All Bases
If you are the leading provider of your household and take care of most of the expenses, you may assume that adjusting your existing life insurance policy is enough. However, there are others factors to think about.
The goal of life insurance is not only to replace lost income but to maintain your family’s standard of living now and in the future, regardless of any additional expenses that may arise. Adding dependents into the mix changes everything and, in many instances, will require a top-to-bottom refresh of your coverage.
You may wish to extend your life insurance policy to include your significant other and any other adults in your family. Even if you are not all contributing on the same financial level to the household, each individual brings their own merit to the group, though this is impossible to quantify accurately.
As a rule of thumb, assigning an estimated monetary value to each covered family member helps you prepare for any additional expenses that may not have been considered, such as housing, education and retirement needs for your children. How much coverage you purchase for each adult is up to you, but expanding your family’s policy to include that is a necessary first step.
A Question of Needs
Providing coverage for every adult is a good start, but something as far-reaching as life insurance necessitates a more well-researched approach.
As you prepare to update your individual policies, you and your significant other will want to ask yourselves a ton of questions regarding your family’s coverage needs. Sure, you can calculate your family’s current expenses, including day-to-day living expenses, but anticipating the future is a bit trickier, especially given the fickle financial market.
Start by making a list of the immediate expenses tied to your future life insurance claim, including funeral costs and any outstanding medical debt, and then estimate for that total as best as possible.
What’s the Plan?
Think about what type of plan best fits your family. Broadly speaking, life insurance can be broken down into two primary forms: term life insurance and whole life insurance. Term life insurance features coverage for a specific number of years and is more affordable, but whole life insurance offers the benefit of a lifelong policy and a built-in cash value.
You may choose to add a rider to your existing policy that will cover your children, or you could invest in a child life insurance policy. A child policy is a whole life insurance policy that grows in value as they grow. The cash value can be used for a college fund or toward whatever they decide, whether it’s a down payment for a home or retirement.
What you choose to purchase may largely depend on how much you’re willing to invest in life insurance and what other assets you have available to compensate for any lack in your insurance coverage.
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Making the transition to a life insurance policy that covers your growing family and determining an adequate amount of coverage requires some thought and planning. Review your options with an insurance agent.
All in all, the benefits of having a comprehensive coverage package in place more than justify the investment you will be making in the long-term financial security and well-being of your family. Your most cherished loved ones deserve the solace that your policy will bring them, and in return, you will be able to breathe a sigh of relief knowing that you have done right by your family.
Are you a new or expecting parent looking to transition to a life insurance plan that will cover your whole family?
Learn more about life insurance through AAA.
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