Becoming a parent is one of life’s greatest joys. If you’ve recently welcomed a new addition to your household, you may be starting to look toward the future in terms of finances. Purchasing a life insurance policy is just as important as starting a college savings account or adding your little one onto your health insurance and when that time comes, Mckenzie Life and Health is here for you.
We offer permanent and term life insurance policies in DFW and we would love to help you plan for the financial security of your loved ones. In today’s post, we’ll review a few key factors to consider as you begin to think about getting life insurance and we’ll discuss which type of policy might be best for your needs. Continue reading to learn more or contact a member of our DFM life insurance agency today to get started.
Factors to Consider When Shopping for Life Insurance
Your Age and Your Children’s Ages
These two factors are very important to consider as they both have a great influence on the amount and type of life insurance that will best suit your needs. If you are in your 20s with a newborn baby, you have a lot of working years ahead of you and you will be financially responsible for your child for the next 18 years. As such, you want to make sure that your life insurance policy offers plenty of coverage to take care of your family should you pass away before your child is out of the home.
While your age and the age of your children is important, the amount of your income is equally as important. This is because one function of your life insurance policy is to replace your income potential upon your passing. Ideally, your income should increase as you get older, but there is also inflation to account for. Estimating how much life insurance you need to replace your income is easy. As a good rule of thumb, simply take your annual income and multiply it by the number of years that you anticipate you will work before you retire.
Number of Children
It goes without saying that the average cost of raising one child is likely to be significantly lower than raising eight. From basic necessities to college tuition, raising a child is no small financial feat. As you can imagine, the number of children that you have can greatly influence the amount of coverage that you need. As you begin to shop around for life insurance, remember that you may want to do more than simply provide for your children’s basic needs and schooling. You may wish to leave them some additional financial security that is not tied to any specific need or expense.
Role in the Household
The amount of life insurance you need if you are the main breadwinner will be largely based on how much money you bring into the home. However, if you are a stay-at-home-parent, it can be much more difficult to determine how much coverage you need. Many tend to overlook a homemaker’s responsibilities even though they are integral to the operation of a household. Depending on the age of your children and the number of children that you have, it is possible that you could need $50,000 of coverage or more to ensure your family is cared for adequately in your absence.
Assets and Liabilities
Lastly, considering your assets and liabilities can help you better determine how much coverage you really need in the end. For example, if you have a sizeable amount of money in your 401k and your spouse or child is listed as the beneficiary, then you may be able to get by with less life insurance coverage. However, if you have a large amount of debt that doesn’t have the potential of being written off, then you may want to choose a higher amount of life insurance coverage to ensure your debts don’t burden your loved ones upon your passing.
Which Type of Life Insurance Policy Is Best?
So, which type of life insurance is best for new parents? The truth is that it depends on your unique situation. Generally speaking, term life insurance is a great option for new parents because it offers the most affordable, straight-forward coverage out there. It is designed to provide coverage for a fixed period of time, such as those years that you are raising your children.
Permanent life insurance is a great option as well, especially if you want a policy that gains cash value over time. Permanent life insurance is also a great investment if you have a child who will be dependent on you into their adult years or if you have a large estate that would be subject to estate taxes upon your death.
Term Life Insurance in DFW
Life insurance policies are powerful financial tools that are designed to ensure your loved ones are taken care of financially upon your passing. Becoming a parent is a monumental occasion and it is the perfect time to start discussing your insurance options with an experienced life insurance agent. Our team would love to speak with you to help you determine if a permanent or term life insurance policy is right for you and we’ll go the extra mile to ensure you receive the most comprehensive coverage at the most affordable rates.
Ready to get started? Contact Mckenzie Life and Health today — we look forward to helping you.