As a parent, make sure that you and your loved ones are covered with insurance and pay the best price.
Whether you are a new or seasoned parent, you want to make sure you keep your children safe. You want to ensure that they are safe from germs, strangers, and especially during tragic events. Buying life insurance for yourself will give you the peace of mind that your children and loved ones will be financially cared for after you pass away. But, how will you know that they have enough money or that you are purchasing the most suitable policy? Here are four life insurance tips for parents who are searching for the perfect policy.
4 Life Insurance Tips for Parents Searching for the Most Suitable Policy
Speak With an Insurance Agent
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One of the most critical life insurance tips for parents is to speak to a life insurance agent. Finding a life insurance agent will make this process a lot less stressful for you, which can be one of the best gifts as a parent. All agents are licensed and can be with one specific carrier or work independently and are appointed with multiple different carriers. Their job is to study the products, what their prices are, and what kind of benefits each policy has. If you were to research the policies independently, you would find it impossible to discover all of the information and understand it all. The insurance agent will investigate for you and see your family the most suitable and affordable policy. Below are the main tasks of an agent:
- Get your details (name, address, health information, etc.)
- Determine how much you can afford for the policy
- Research and put together options for you
- Follow up with you to ensure the policy is in place
Decide on the Right Policy
There are two major categories for life insurance policies you will have to decide between for your coverage.
Term life insurance: A term life insurance policy has no cash value accumulation but is perfect for those on a limited budget. If you purchase this policy and decide to turn it into a long-term policy, you can do so.
Whole life insurance: Whole life insurance policies are used for long-term death benefit protection and have a stable cash value accumulation, unlike the term life insurance policy. If you wanted to cash out before you pass away, there is a potential to receive dividends.
Determine How Long You Need the Policy
Not every family will need to purchase a life insurance policy for the same amount of money and length of time. To find out how much money you should invest into your policy coverage, some experts believe in the income replacement method of calculating coverage. The income replacement method is an approach that will determine how much income will be lost after the death of the family breadwinner. To decide this for yourself, multiply your income by 5 to 10 to get an estimate of your coverage goal. There are various online calculators you can use or speak with your insurance agent.
Other experts also recommend following the DIME method:
Debt- mortgage, credit card debt, car payments, etc.
Income replacement- Do you want your coverage to replace your income for the rest of your beneficiary’s life?
Mortality- burial wishes and costs
Education- Do you want to pay for the education expenses for your dependents?
Name a Trusted Beneficiary
The beneficiary will be the person who receives the proceeds of your life insurance policy after you pass away. This person will be responsible for the money, so avoid naming a minor child as the beneficiary because children may not receive the funds. Also, make sure you do not sign it off to your estate because it could lead to tax implications. Again, speaking with your insurance agent will allow you to make an educated decision.
There are an endless amount of life insurance tips for parents, and it can become extremely overwhelming. Fabric can be your one-stop-shop for all of your family’s finances and can allow you to search for the most affordable life insurance policy. Their tools will give you tools to plan your family’s financial future while also simplifying them. Take as little as ten minutes to start the process of finding the best life insurance policy for you and your family!