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If you're expecting or have just had a baby, you may consider life insurance to be a necessary expense. With so much added responsibility, it could provide peace of mind, knowing that your family is taken care of if the worst happens.
As a new parent, you have many more financial responsibilities so it's important to consider the following when taking out life insurance.
This depends on a number of factors like how much you earn (and are therefore financially relied upon) plus your age (how many years of work you have left). Generally though, it's recommended that your life insurance lump sum – the money your beneficiaries receive when you die or become terminally ill – is around 10 times the value of your annual income. So if you earn $100,000 a year, you'll want a $1 million life insurance payout.
Remember though, this isn't a one-size-fits-all kind of situation. You need to take into account all of your expenses and bills when calculating exactly how much you'll need to leave behind for your family. This can include:
You don't need to, but it's probably a good idea. Even if only one of you works, it's still smart to have a life insurance policy. This is because while you may not earn an income, you save your household thousands of dollars a year in child care expenses, babysitter costs and more. If you were to die, your partner would most likely need to employ someone to look after your child while they continue to work.
If you're only interested in getting one life insurance policy though, then go with the breadwinner. But remember to still take into account those extra costs, like child care, that the stay-at-home parent currently takes care of.
Life insurance, sometimes referred to as death cover, isn't the only insurance option worth taking into consideration if you have a child to care for. Take a look at what else may be a good idea for you:
Yes. Here are some of the perks of a life insurance policy:
Having your first child is the biggest step you'll take in your life and it pays to be prepared. A life insurance policy is one of the best ways to financially secure your family's future and provide peace of mind. Even if the worst happens, it's good to know your family can continue to live the life you've built for them.
Generally speaking, the younger the better, as you're less likely to have health conditions so your premiums will be lower. But it's also good to take it out when you're approaching a new stage in life, like buying a home or having your first child so that your policy is equipped to deal with your expenses.
Yes. You can call and update your policy whenever your needs change. Your insurer will adjust your premiums to reflect any changes.
Your beneficiary is the person or people that you nominate to receive your life insurance payout. Since it's your first child, it's a good idea to nominate someone else, like your partner, as if the beneficiary is still a minor when you die, your life insurer can't pay them until a guardian is appointed. You can have more than one beneficiary.
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