Use our life insurance calculator to find out how much life insurance you need to give you and your family ultimate peace of mind.
When you first get engaged or announce you’re having a baby, chances are you’ll get asked a lot of questions. (People are nosy!) “When’s the wedding?” or, “What’s baby’s name?” are some of the usual suspects.
But questions like, “Have you considered term life insurance?” rarely come up. (And we can’t seem to put our finger on why...)
All kidding aside, every new life milestone comes with a new set of important questions, considerations, and conversations to have... like if you really should consider term life insurance, for example. It might not be the most fun way to kick off your next season of life, but you’ll be so glad you took the time to get your answers and have those hard conversations.
Read on to find out how a term life insurance policy can help you, your spouse, and your family make ends meet and feel financially secure — if the unexpected were to happen.
Understanding your life insurance options
There are two common kinds of life insurance policies you can buy — term life insurance and whole life insurance.
Term policies are more flexible in length. Plus, they are usually pretty simple and low-cost. If something were to happen to you while your policy was active, your death benefit would be paid out to your beneficiaries, or the individual(s) you chose to receive the benefit. Whole life insurance, also called permanent life insurance, is more complex. It’s lifelong coverage that also has an investment component, which is known as the policy’s cash value. This cash value grows in a tax-deferred account, so you don’t pay taxes on these earnings while they accumulate. You can use this money in retirement if you’d like or pass it on to your dependents.
For a more complete breakdown of life insurance and our guide to getting the right policy, click here.
How life insurance can help newlyweds
If you recently got engaged or married, chances are you’ve already had a discussion about how you’ll address financial matters. (And if you haven’t, scroll down to our list of four questions you should ask before beginning a new life chapter as a way to get started.) No matter if you’re combining, semi-combining, or keeping your finances separate, a term life insurance policy could be beneficial — here’s how.
Term life insurance protects you and your spouse from the financial strain that may come if one of you passes away.
Even if you don’t combine your finances, collections agencies can come after you or your spouse’s assets for debt (like student loans). From your mortgage to funeral expenses, a term life policy can help bring peace to your mind, so that you can focus on more important matters during such a sensitive time.
Term life insurance can support your long-term plans.
If you dream of owning a home, having a family, opening a business, and more, having a term life policy in place can allow you to make those dreams a reality. If the unexpected happens, you or your spouse can continue to live out your dreams with financial security.
Term life insurance can help you protect your tomorrow at a low rate today.
Term life policies are affordable, meaning they won’t break the monthly budget. The sooner you purchase a policy, the lower your rate will be. So even if having kids is in your (much later) future, you’ll be able to lock in a low rate as soon as today.
How life insurance can help growing families
If you’re stepping into a new role — parenthood — there are a few reasons term life insurance could make a lot of sense for you and your growing family.
Term life insurance can help with the high costs of raising a child.
The U.S. Department of Agriculture (USDA) estimates that the average cost of raising a child is $233,610, which includes the cost of basics and necessities, or about $14,000 per year. A term life insurance policy can give you the peace of mind that if something were to happen, your child’s necessary expenses (like daycare or school, medications, clothes, and food) can continue to be covered, and not a financial burden on your loved ones.
Term life can help your child pay for college if the unexpected happens.
When your baby is just a few days old, it’s hard to imagine they’ll grow up someday and head off to college. But if you ask any parent, they’ll tell you that time flies — and that day comes way sooner than you think. It’s important to consider how you’ll pay for their higher education expenses (if your child chooses to attend college) now, especially as the cost of tuition continues to rise. Starting a 529 college savings plan is a great start. And if something were to happen to you, your death benefit could contribute to any remaining education expenses.
Term life can benefit single-income households.
If you (or your spouse) decide to become a stay-at-home parent after having a baby, a term life policy can be a helpful income replacement if something happens to the primary breadwinner. This money can give you or your spouse the cushion they need to figure out their next steps, pay off debt, and support dependents.
The 4 questions to ask before beginning a new life chapter
For the most exciting of times (like an engagement or recent pregnancy announcement), it’s tempting to dive right in... and ignore some really important conversations. Take a look at these questions below to make sure you have concrete answers. It could save you a lot of financial headaches down the road! (Then, by all means, get back to celebrating.)
1. Do you have any unpaid debts?
Whether you’re getting married, having a baby, starting a business, or purchasing a home, knowing what you need to pay off (and how long it will take) is crucial for budgeting.
2. What assets do you have now?
What’s in your savings, investments, and retirement accounts? Do you own a home or business? Spend some time figuring out the assets you do have today — so you know what you need to protect for the future.
3. What are your career plans?
As your life changes, your career plans and aspirations may too. For example, if you’re starting a family, you and your partner might decide it’s best that one parent stay at home. Or if you’re going back to school, you might decide to work part-time to focus on your degree. Understanding your career plans (and how it might affect your finances) can help you better prepare for a new chapter.
4. Do you already have a life insurance policy?
Some employers offer life insurance as a benefit, which usually is equal to your annual salary. For some, this might be enough to cover any outstanding expenses, but for others, it may only scratch the surface. Assess the life insurance you already have available to you, so you can get a better idea of what you need in your next chapter.
How much does it cost to protect your spouse and family?
Products like identity protection and electronics protection come at a fixed cost. Term life insurance is a little different. Your rate is based on a few different factors. Here are a few of them:
Age. Generally, the younger you are, the less you’ll pay for life insurance. That’s why it’s wise to buy life insurance as early as possible. The longer you wait, the more your rates will increase.
Gender. Women will almost always pay less than men of the same age and health for life insurance. Why? One simple truth: women have longer life expectancies. (80.5 years for women and 75.1 years for men, if you’re curious.)
Health. This includes pre-existing conditions, your blood pressure, height, and weight.
Your smoking status. Since smokers are at a higher risk of developing health issues, they are charged a higher rate for their term life policies.
Your family medical history. You might be asked if you have a family history of health conditions such as heart disease, diabetes, or cancer.
Keep the house. Pay for college. Cover your debts. All with term life insurance.