Life insurance is one of the most important financial products young families can secure. A young couple with children needs to consider what would happen financially if one spouse dies. If only one spouse is the breadwinner and suddenly dies, the family could quickly become financially unstable. Even if both spouses are working shared expenses like a mortgage could ruin the family finances.
There are many other reasons for young couples with kids to secure life insurance, such as:
- Couples typically accumulate assets during this period of time, and an unexpected death can really damage this phase.
- This is also the time when debts are highest (mortgage, student loans, etc.), and those debts need to be paid.
- Also, it’s not cheap to raise kids.
- You are expected to be healthier and have a long life ahead of you so securing a life insurance policy in your younger years means you’ll pay lower premiums than if you buy a policy when you are older
Life insurance options
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Level term life insurance
- If you have a young family, you may want to consider a level term life insurance policy. This is one of the simplest forms of life insurance: you just pick a length of time, a death benefit, and the premium is stays the same through the life of the policy.
- A level term life insurance policy:
- Lets you pick a policy length, which you could set to expire when you retire, or the kids graduate from college. A standard length of time is 20 to 30 years.
- Lets you choose a death benefit that meets your needs.
- Is often relatively inexpensive.
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Permanent life insurance
- You may also want to consider a permanent life insurance policy, which provides coverage during the entire lifetime of the individual. It can also have the benefit of accruing a cash value over time.
- But for the coverage to remain valid, premiums must be paid on time. There are benefits and drawbacks to each type of life insurance; it really depends on the specific needs of the family.
Buying the right coverage amount
You will also want to consider how much life insurance will cover the needs of remaining family members.
- number of family members,debt and future debt will all play a role in how much life insurance coverage is best.
- make an outline of your present monetary obligations and needs, and a prediction of what those needs and obligations will be in five, 10, 15 and 20-plus years. Combine this information with your total household income to determine the best amount of life coverage.
- Make a list of recurring monetary obligations – mortgage, student loans, vehicle loans, credit card debts, etc. Don’t forget future obligations, such as a child’s college tuition, in your calculation so that you have the most accurate estimate on how much coverage you should purchase.
Be prepared
Young families can be ensure financial solvency with a life insurance plan. However, even the best-laid plan can become dated as life changes. So, periodically re-evaluating your life insurance coverage is part of being prepared.
Call us if you need help in deciding the type and amount of life insurance to take out, or in re-examining your coverage.
