Life Insurance for Parents

You're on your way home from the hospital with your newborn baby. He or she is sitting in the car seat, taking in the world for the first time. Meanwhile, you're taking every precaution, making sure that the car seat is secure and your little one is buckled in snuggly before you pull out of the parking lot.

As a parent, your baby's safety is your top priority. There's another important consideration for new parents who want to help protect their newborn — life insurance.

If you passed away, life insurance could help to provide much-needed financial protection for your family. It can help to cover costs like your baby's food, clothing, and diapers, helping to ensure that his or her needs would still be met in your absence. In that way, it's like a financial security blanket for your child, all the way from the cradle to college.

Read on to learn more about life insurance for parents — and why you may need it to help protect your family's future.

Why Parents Need Life Insurance

Raising a child can fill your heart in ways you'd never imagined. But the cost of raising a child can be a challenge for most families, especially if they're on a tight budget.

In the first two years of a child's life, middle-income parents might expect to spend roughly $12,680, according to data released in 2017 by the U.S. Department of Agriculture.¹ And while your baby will grow out of diapers, bottles, and car seats, new expenses, such as sports, dance, and weekend activities will likely replace them.

If you passed away, those costs would pass along to your spouse, or child's guardian. Life insurance can help provide you with the peace of mind that, even in your absence, your little one's needs would still be met.

The benefit amount from your policy could help to cover both your child's basic necessities, such as diapers, food or clothing, as well as future expenses, such as college tuition.

Additionally, should your child have special needs, he or she may need financial and/or physical support for a longer period of time. In these instances, you may want to consider obtaining a higher coverage amount or longer duration, in order to help cover their medical needs.

The money from a life insurance policy could help a spouse or caregiver provide the life you want for your children, even if you're no longer here to do so.

Which Parent Should Be Covered with Life Insurance?

Married couples share nearly everything — from sink space to dish duty. They also often share the responsibility of bringing home a paycheck. In fact, nearly half of married-couple families were made up of two employed partners, according to the Current Population Survey from the Bureau of Labor Statistics.²

If your family depends on two paychecks to make ends meet, it's important to make sure that both parents have a life insurance policy — not just the primary breadwinner.

Stay-at-home parents are another important consideration. They fulfill a number of roles — caregiver, teacher, nurse, chef, driver, psychologist, and activities director, to name a few. If the stay-at-home parent passed away, you would likely need to source paid help to take over those services.

As an example, let's say that your significant other watches your baby at home while you're at work. If he or she passed away, you might need to make arrangements for your child to go to daycare. The average cost of center-based daycare for infants ranged from $6,615 in Arizona to $19,805 in Washington, D.C., according to member data from Care.com, an online community for childcare.³ Life insurance can help to cover those unexpected expenses, lessening the financial burden during an already emotionally difficult time.

Not married? Life insurance for single parents is important too. Maybe you're one of two dads running the household, a single mom or a recent divorcée. Every family is different and so are its needs for life insurance. But all parents share have one thing in common — the desire to protect their children. Life insurance for your family can be a way to help you do just that.

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How Life Insurance Works

The way life insurance works is it provides ready money to the people who depend on your paycheck, such as a baby or spouse, if you pass away.

At that time, the life insurance company would pay a set amount of money (the "benefit amount") to the person you chose as your beneficiary. You can name any person you'd like — and you can even name more than one.

Thinking about naming your child as your beneficiary? There are additional steps to consider. If he or she is still a minor at the time of a life insurance payout, a court might be asked to decide who should look after the funds until your son or daughter reaches age 18.

For that reason, it might be wise to also name a "contingent beneficiary," who would look after the money until your child is legally an adult. This could be the same person you've named in your will to be your child's caretaker, in the event that you pass away. It might also be a good idea to discuss this with the person you choose, to ensure he or she is willing to take on the responsibility.

Types of Life Insurance for New Parents

As a new parent, your time is quickly filled with feedings, diaper changes and — most importantly — cuddles from the world's cutest baby. So, while there are many types of life insurance, you can save time by narrowing in on the two main ones: term or whole life insurance.

Term Life Insurance is protection that expires after a set period of time (i.e. your "term"). It's ideal for those who have greater coverage needs that may diminish over time.

If you have a newborn and a mortgage, for example, you might need more coverage now than you will once your child graduates from college and your mortgage is paid off. It's also one of the most affordable ways to protect your family.

Unlike term life insurance, Whole Life Insurance is protection that lasts for life. As long as you pay your premiums, you can keep the policy — and pay the same amount for it — for up to a lifetime. It also comes with the added bonus of "cash value," which is money that gets set aside each time you make a payment.

Left alone, that money will continue to grow, like a nest egg for the future. If you name your child as a beneficiary, he or she can use that money toward a number of things, such as college tuition, the down payment on a home, or seed money for a business venture.

So if you're looking for cash value that can grow alongside your child, whole life insurance is a good option to consider.

Choosing a Coverage Amount

Some life insurance coverage is better than no coverage. However, you'll want to ensure that you have enough to help cover your child's needs — now and in the future.

How much coverage do you need? It's different for everyone.

To estimate that number, Life Happens, a nonprofit organization that focuses on life insurance and other products, recommends asking yourself these two important questions:

1. How much money would my family need to cover immediate expenses should I pass away (e.g. funeral expenses, debt, monthly rent or mortgage, and car payments, among other things)?
2. How much income will be needed in the future, to help support my family's long-term needs (e.g. college tuition, retirement)?

You can use our term life insurance calculator to help estimate how much coverage your family might need.

Life insurance for parents gives you the peace of mind that your children will be financially protected — no matter what. That way you can focus your time and energy on something even more important: cherishing every toothless smile.