The Big Financial Decision You May Be Forgetting

Crib – check!
Car seat – check!
Minivan – check!
College Savings Plan – check!
Life Insurance – oops!

Life Insurance – one of the most forgotten financial decisions that parents need to make.  It’s easy to think about all of the things that you need for the baby in the short-term (saving for college is always a hot topic – just remember to save for your own retirement before you save for college) but thinking about things like life insurance (or long-term disability insurance) often get forgotten.  I am a CPA (certified public accountant) and my husband also works in finance and has a degree in Accounting and we even forgot about this important investment.  Here is some information to help you decide what next steps are best for your family.

Who needs life insurance?
A common thing that I see is families where only one parent has life insurance, generally this occurs when only one parent is working and that ends up being the insured parent.  This is a great first step as this takes into account the loss of income should something happen to the parent producing income.  When deciding who to insure, the costs incurred with the loss of a stay at home parent should also be considered.  Another thing to consider is what other assets you have.  With sufficient assets you may determine that you don’t need life insurance at all.

How much life insurance do I need?
BankRate has a great calculator to help you determine how much you need or you can sit down with your spouse and determine it yourself.  The most important things to consider are your goals from buying the insurance (pay off your house, etc.) and number of beneficiaries (how many people you plan to support).

Where can I buy life insurance?
One of the most common places that people get life insurance is through their work. Some workplaces provide a certain level of life insurance for free and allow employees to purchase additional amounts.  One of the benefits of workplace insurance is they are generally competitively priced and usually don’t require an exam.  For a stay at home parent, a lot of work places will also offer an insurance option for the spouse of the employed (though the insurance coverage is generally lower).  While insurance through work is great, consider that if you quit or get laid off you most likely lose your insurance as well.  If this happens later in life and you seek private insurance you may not be in as good of health (leading to higher premiums) and you will have lost what you paid in.  Another option is purchasing through an insurance company.  Through an insurance company you will most likely have more insurance options (term life v.s. full life, number of years, etc).

What if I already have life insurance?
A lot of people have already purchased life insurance before having children.  Just remember that as your circumstances change (more kids, bigger house, etc.) that your insurance needs may also change.  You might want to consider your needs periodically to make sure you have enough insurance, or even ensure that you aren’t overpaying for unnecessary insurance, with each new life event.

I know that talking about life insurance isn’t fun, no one wants to broach this morbid topic.  Consider now though your potential needs so that you don’t have to worry about money as well as the loss of a loved on.  Of course if you have any further questions be sure to check with your financial advisor or insurance agent.