It might not be the first thing you think about when you bring your new baby home, but life insurance is essential for anyone with kids. Consider it an emergency fund on steroids. Having life insurance means that if something happens to you, your family has the money for your partner’s retirement, everyday expenses, or a nest egg for your little ones.
Wondering where to start? Here are 9 tips you should know.
Buy ASAP—unless you’re pregnant
Age does matter in life insurance. Rates go up an average of 4.5-9% every year you put off getting covered. There’s one major exception for soon-to-be parents: if you’re past the first trimester, it’s better to apply at least three months after your bundle of joy arrives.
Why? Because any side-effects or complications during pregnancy—even temporary weight gain or gestational diabetes—can translate into higher rates.
Plan for the future
Insurance pros say you should buy a policy with coverage equal to 10-15 times your income, but actually, you might need more. Remember to factor in your mortgage and other debts, or expenses that are further down the road, like college tuition.
Make sure it fits your budget
A policy can’t do much for you if you can’t afford the premiums. But, people tend to overestimate the cost of life insurance; term life insurance is actually pretty affordable.
A healthy 35-year-old female could pay just $24.40 per month for a $500,000 policy that lasts 20 years. Even a 35-year-old female with some health concerns would pay only $37.21 every month.
Don’t leave out stay-at-home parents
The skills required to parent and manage a household equate to a salary of at least $178,210, based on recent surveys. If the partner who runs the ship is no longer around, you’ll need to take on more responsibility or hire outside help.
Stay-at-home parents who don’t earn an income can get coverage based on their spouse’s policy—usually the same amount of coverage, up to a limit.
Don’t make your kid a beneficiary
When you fill out your application, you’ll need to pick a beneficiary—the person who gets the payout when you pass away. It might feel natural to name your little one; they’re who you want to support, after all.
But life insurance companies won’t pay out to minors, and the money will get tied up while a court decides who should be responsible for managing it. Instead, name your spouse, a trusted family member, or a trust as a beneficiary.
Avoid life insurance for kids
Don’t believe the commercials—unless your kid won’t be able to get a policy as an adult or is a TikTok star who contributes to your household income, they don’t actually need their own life insurance policy.
If your goal is to save for your mini’s future, a 529 plan or IRA is a safer (and cheaper) bet. If having insurance for your little one is about peace of mind, it’s much cheaper to add coverage for them to your own policy with a rider.
Don’t fall for upsells
You’ll be given a lot of choices when you start looking for a policy, but for most people, the simplest option—term life insurance—is best. A term policy gives you life insurance coverage for a set period of your choosing (usually 10-30 years), then expires. The idea is to pick a policy length that matches how long you expect to financially support your kids or other loved ones.
Term insurance has the lowest pricing, lasts only as long as you need it, and is easy to cancel. Other policies you might be pitched, like joint insurance for couples, are complex and pricey, so they’re best reserved for special circumstances.
Shop around
Not all life insurance companies are made the same. You might get better rates from one company than another, especially if you have any pre-existing conditions. Compare quotes before you commit to a company, and weigh other info that matters to you, like customer service ratings and how tech-savvy the provider is.
Independent brokers like Policygenius work for you, not the insurance company. Our agents can help you choose the right company and policy for your family.
Don’t set it and forget it
Life insurance is pretty low maintenance, but your policy shouldn’t sit in the back of a drawer for the next 30 years. Review your policy at least once a year to make sure the details are still accurate:
- Do you need more coverage for debt or a new child?
- Do you need to change the beneficiary?
- Is all of the contact information still correct?
Keep your beneficiary in the know about any changes and where to find the policy if they ever need it.
What to expect when you’re expecting (a policy)
So, what does buying a policy actually entail? Most of the application process is spent on underwriting, which is how your insurance company sets your rates. Here’s what you’ll do:
- Fill out an application. This includes basic information like your age and any pre-existing conditions.
- Have a phone interview. You’ll cover your health history and habits with an agent.
- Take a medical exam. This is like an annual physical, and includes blood and urine samples for routine testing.
Pro tip: You might be able to skip the medical exam. Some insurers have an accelerated underwriting track that can get you an application decision in two weeks or less instead of five to six weeks. The catch? If you have complex health issues, you can’t go this route.
After the medical exam, your insurer will look at public records like your credit history and motor vehicle report for other potential insurance risks. They’ll put all of this information together to figure out how to price your policy. Once you get your policy paperwork, all you have to do is sign and pay your first premium to get covered.
Ready to shop for a policy? Reach out to Policygenius for all of your insurance needs.
