Starting your family? Here's some information new parents need to know about life insurance and how it can help protect themselves and their children.
Article: 4 minutes
Updated: April 26, 2024 Published: May 8, 2023
By: Matt Lyon Reviewed by: Editorial contributors
Information courtesy of USAA Life Insurance Company and USAA Life Insurance Company of New York.
Not only are you thinking about how much the hospital bill might be, but you're also budgeting for diapers and day care. That's all on top of navigating a new work schedule, where all of a sudden you feel squeezed between the pressure to perform and not having enough hours in the day.
Many new parents — both stay-at-home parents and working parents — share that feeling of financial stress. For good reason: The average cost of raising a child is more than $230,000, according to the U.S. Department of Agriculture. Since 1960, the USDA has been tracking the cost of raising a child through the age of 17.
How would your family cover those expenses if something were to happen to you or your spouse? One of the best tools you have to protect your new little one is life insurance. In the event of a parent's death, life insurance can cover final expenses and contribute to all the costs associated with raising a child, including their college education, which isn't even included in the USDA's estimate.
And, just knowing that you own a life insurance policy can go a long way toward your peace of mind because you know you're doing all you can to protect your family.
Video Duration: 2 minutes 34 seconds
Description of visual information: [Information Courtesy of USAA Life Insurance Company and USAA Life Insurance Company of New York] End of description.
Whether you're a new parent or getting ready to grow your family, you've got a lot on your mind. And finances are likely a part of that. Not only are you budgeting for diapers and daycare, but you may also be worrying about topics you've never thought about before, like: What would happen to my family's finances if I were to die unexpectedly?
This is where life insurance comes into play. It can help add peace of mind and financial security for the family you're building. As a new parent, getting life insurance is often easier than you may think. To start, you may review employee benefits that you or your spouse have available.
Often employers will offer some form of group life insurance for little to no cost. In many cases, though, that's not enough. So, you'll still have to buy a stand-alone policy to get the full protection you need.
There are two main types of life insurance policies: term policies and permanent policies.
If you're just starting out, a term policy may be your first consideration. Term policies provide simple life insurance protection in exchange for affordable premium payments. The premiums either increase yearly or stay level for a set duration. You'll be covered until you reach the age where the policy expires or you decide to cancel coverage.
On the other hand, permanent life insurance is coverage that's meant to last a lifetime. Although your premiums may be higher, you'll have coverage that's there for old age and can build cash value. Both options typically include a child rider, which offers added protection for your kids. If your budget allows, you can also set up a stand-alone life insurance policy on your child.
How much life insurance should you get?
Consider the LIFE acronym:
L: Liabilities.
How much money would it take to pay off all your debts?
I: Income.
How much of your income will your family need to live comfortably after you're gone?
F: Final expenses.
How much should be set aside for the funeral and any final medical expenses?
E: Education goals.
How much would your children need to pay for their education goals?
No one knows what the future holds. With life insurance, you can rest easy knowing that your family will be protected. Call us at 800-531-LIFE (5433) to learn more about our life insurance products.
Description of visual information: [Visit usaa.com/life to learn more or call 800-531-LIFE (5433).
This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional.
Life insurance and annuities provided by USAA Life Insurance Company, San Antonio, TX and in New York by USAA Life Insurance Company of New York, Highland Falls, NY. All insurance products are subject to state availability, issue limitations and contractual terms and conditions. Each company has sole financial responsibility for its own products.
8114654] End of description.
If you're shopping for a life insurance policy as a parent, you have plenty of options.
Start with your employer. If your company will let you opt in for free coverage that's included in your benefits package, you definitely want to take advantage of that.
In most cases, that's not enough.
You'll also want to purchase a stand-alone policy, which will give you the protection you need and will remain in place, even if your employment situation changes.
Policy types include term insurance, permanent life insurance or a combination of the two.
30-year-term insurance is a common choice for people just starting out. It typically provides a higher amount of coverage for every dollar you spend.
Term premiums either increase annually or stay level for a certain period. As long as you pay your premiums, your coverage stays intact until the policy's scheduled expiration date, or until you decide you no longer need insurance.
On the other hand, permanent insurance offers a potential for lifetime protection, as well as cash value accumulation. Although it can take a larger chunk of your monthly budget, the cash value can be considered an asset.
Both life insurance options typically add on a small amount of protection for any children in the household. This add-on is called a child rider.
Depending on your financial priorities you may also want to consider setting up a stand-alone life insurance policy on your child. Insuring your children now can help protect their future insurability and get them off to a solid financial start.
When you choose life insurance, you want to be sure the death benefit will meet your needs. Ready to make a life insurance plan? For guidance, use USAA's Life Insurance Calculator.
The L.I.F.E. acronym can also help to determine how much you need:
L Liabilities. How much money would it take to clear your family's debts?
I Income. How much money would it take for your family to meet their current monthly expenses if they lost your income or had to replace your contributions to the household?
F Final expenses. Consider funeral costs, final medical expenses or other cash needed to help with immediate costs realized at your death.
E Education goals. How much would your children need for future education expenses?
Consider whether there are any funds currently available for your family to offset these needs. This can be existing savings or other life insurance policies.
USAA believes that when considering life insurance, the focus isn't on your death; rather, it's on the life of those you care about who rely on you. We understand that as a new parent, this responsibility couldn't ring truer.
So, although there's been a lot that has changed in your world, one thing that hasn't is USAA's dedication to serving your financial needs. That's why we offer a full suite of life insurance products to meet a variety of goals.