Millions of women will welcome their first child to the world this year, possibly even you! If you are pregnant, your days are likely filled with a mixture of excitement and nervous anticipation. You may be baby-proofing furniture and painting the nursery a cheerful color. But there’s one purchase you may not have thought about as a must-have for your baby, and that is life insurance.
There are several reasons to buy a life insurance policy before you give birth. First, think of the value you provide to the household. What would happen if you were no longer there to provide support for your child? If your partner is a stay-at-home parent, for example, would they be able to carry on without your paycheck? They could have to take a second job to cover the loss, or even quit their job to oversee your young child’s upbringing.
If you’re a stay-at-home mom, your death could be equally devastating from a financial perspective. Would your partner be able to afford to replace your contributions as a parent and homemaker? To put these contributions in perspective, the loss of a stay-at-home parent costs an average of $178,201 per year.
What Type of Life Insurance is Right For You?
There are two main types of life insurance: whole and term.
Term life insurance can be a practical and affordable coverage option for most families. Term policies provide protection for a predetermined time frame at a fixed monthly cost. A general rule of thumb is to budget for a policy that covers your child until they are no longer being supported by you.
You might consider whole life insurance if you are nearing retirement age and want the security of a guaranteed death benefit for your child, or if you’re planning your estate and want to pass assets down to the next generation.
Related: Life Insurance Guide for New Parents
How Much Life Insurance Will You Need?
To calculate the amount of coverage you need, add up all of your current assets and subtract your debts and likely future expenses. Not sure if you calculated correctly? Try our coverage calculator.
As your child grows, so will the expenses they bring. It can cost more than $233,000 to raise a child to the age of 17, not including the cost of their college education and living expenses. It’s also becoming more common for adult children to live with their parents into their early twenties as they establish themselves. Their financial needs (student loans, rent and living expenses) should be taken into consideration when you’re thinking about how much coverage you need.