Term Life Insurance 101 for New Parents

Feb. 8, 2019

As a new parent, getting life insurance is probably the last thing on your growing to-do list. But did you know that getting life insurance is not only easy, it is also one of the best things you can do to protect your child’s future? In this article, we’ll explain how term life insurance offers reliable protection that fits your budget.

What is term life insurance?

Term life is a life insurance policy that lasts anywhere from 10-30 years, depending on the term length you choose. Term life is generally a good fit for new parents who want an affordable, straightforward life insurance policy.

While the policy is active, you pay monthly or annual premiums to keep it in force. If you die while the policy is in force, then your insurance company will pay a death benefit to your beneficiary. Once your policy term is up, you no longer make payments.

If you outlive your policy term, you won’t have any coverage from the day the policy term ends. To avoid this, you can buy a new term life policy, convert to a permanent policy or if you had a return-of-premium policy, you can get all the money you paid into the policy back in a refund.

Who needs life insurance?

Almost everyone can benefit from term life insurance, especially new parents. Anyone who has dependents or loved ones who would suffer financially if they were to die needs life insurance. It is also wise to buy your own policy separate from your spouse to ensure that your family has a financial safety net if you (or your spouse) were to unexpectedly pass away.

If you are a stay-at-home parent, you should also consider life insurance. You provide valuable services that would cost money if someone else had to do them (i.e. meal prepping, cleaning, acting as a personal valet service to your children). Without your support, your family members would have a difficult time in your absence. Having life insurance can ensure that your family is cared for in the event of your passing.

What are the benefits of term life?

For new families, the benefits of term life are plentiful. Rates are usually very affordable, and premiums will stay the same through the term length. For families with a tight budget, this is a good way to get valuable protection at a fair price.

Another advantage of term life is the death benefit, which is usually a tax-free, lump sum of money that your beneficiary can use to pay your remaining mortgage, cover final expenses or medical bills and pay for funeral costs. In the event of your death, this payout can offer relief to your loved ones by providing financial support during a difficult time.

How much does term life cost?

The cost of term life is usually determined by assessing your health, including your nicotine use and your age at the time you apply for coverage. You will also be able to define your preferences for term length, riders and other options. The healthier and younger you are at the time you apply, the lower your premiums will be.

Currently, the cost of raising a child in the United States is upwards of $234,000. For a healthy adult, protecting their child with term life insurance can often be as affordable as $2 a day. This low rate is a great reason to get life insurance coverage sooner rather than later.

How long should you get life insurance coverage?

A 20-year term life policy is usually the most affordable, as this term length gives you enough time to pay off debts accrued from a mortgage and student loans. If you choose a 30-year term, your premiums may be more expensive, but your rates also don’t change during the life of the policy.

To get a better understanding of what term length will support your growing family, we recommend discussing your options with your Symmetry Financial Group licensed agent, who can help you customize your policy to best fit your needs.

When is the right time to buy term life?

As a new parent, the best time to buy term life insurance is now, while you are young and healthy. Because qualifying for coverage depends on your age and health at the time you apply, it is wise to apply sooner rather than later.

When you are deciding how much term life insurance coverage you need, you should consider:
•    Your income
•    Any outstanding debts, like a remaining balance on your mortgage
•    Dependents who rely on you for financial support
•    If you want to pay for your child's college education
•    End of life expenses or medical expenses related to your passing

Shopping for a term life policy

When you shop for a life insurance policy, there are a few things to keep in mind. Be sure to choose a policy length that matches your needs and expectations for coverage. Also, choose a policy amount that will support your beneficiaries: consider your income, debts and the number of people who depend on you. Many policy amounts range from $100,000 up to $250,000 and can be higher or lower depending on your needs.

Once you apply for coverage, you might need to undergo a medical exam. Some insurance companies require a short medical exam to ensure that you are healthy at the time you apply for coverage. Some insurers now offer policies in which a medical exam is not required, which can be convenient for busy families.

Naming your beneficiaries

Since you are purchasing this insurance with intent to protect your child’s future, you should choose a beneficiary who you trust to support your children if you were no longer able to. Keep in mind that if you name your children as beneficiaries and you die while they are still minors, their legally appointed guardian will manage your assets for them before the proceeds will be distributed.

Can you get life insurance while you’re pregnant?

Yes! Pregnancy is a great time to get a life insurance policy. If you need a medical exam to qualify for coverage, your pregnancy generally won’t affect the results of the exam. The doctor will account for normal weight gained during pregnancy and will adjust for expected differences in certain lab results. It is best to apply for coverage as early in your term as possible so you can avoid any complications that may arise later in your pregnancy, like if you were to develop gestational diabetes.

Protect your mortgage with term life insurance

In the event you die unexpectedly, a term life policy can help your family pay off a remaining mortgage balance through the death benefit.

For example, if you purchase a 20-year term life policy with a face value of $50,000 and you pass away 15 years after you bought the policy, the insurance carrier will pay your beneficiary $50,000, assuming you kept up with your premium payments. Your beneficiary can use this money to pay off your mortgage, leaving your family with peace of mind knowing they can stay in their home.

What happens when a term life insurance policy ends?

When your term life policy is getting close to its end date, you will likely get a letter in the mail reminding you that you have a few options for ending or continuing coverage.

When you buy term life insurance, you are purchasing coverage for a specific time frame, so, ideally, at the end of that period, you won’t need life insurance anymore because your children are grown and financially independent and your debts are mostly paid off. At this stage, you might no longer need this type of life insurance.

When your term life policy is about to end, you can:
•    Renew your policy by adding a new term to the policy amount. Keep in mind that the insurer will consider your health and age when you re-apply for coverage, so your rates could be higher.
•    Convert to a permanent policy like universal life insurance , which offers a death benefit, flexible premiums and a cash value savings component that can supplement income and pay expenses.
•    Terminate your policy. If you no longer have children who are dependent on you, you might no longer need term life insurance.

Term life vs. universal life

While term life insurance protects a certain period, a universal life insurance policy is a more permanent option. Universal life insurance provides a death benefit, flexible premiums, and includes a cash value savings component.

Premiums for universal life are usually higher than term life policies. Universal life offers unique flexibility and withdrawal features that can be a good option if you want some safeguards around your payment schedule or you want to access loan and withdrawal features.

Symmetry Financial Group can help

When you connect with Symmetry Financial Group, your licensed agent can ease the stress of shopping for a policy by explaining your options and finding a policy that fits your budget.

Life as a new parent can be challenging. We are here to help make things a little easier. Request a Quote today to see how affordable getting life insurance can be.

 
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