It is always a joyful occasion when a couple welcomes a child into the world and becomes the newest parent on the block. Away from the merriment, there is also a cloud of uncertainty that lingers in the minds of the parents. The issue of providing for the child deep into the future is a major concern. Well, that should worry you no more if you are a new parent out there because, with a life insurance policy, you can protect the future of your child.
How Life Insurance Works
And you may be wondering how life insurance works. Not to worry, this is how.
It is a simple process, the parents have to seek out an insurer that will have a policy that covers their needs. The policyholder then has to pay a particular amount stipulated as per the policy, in a recurring fashion. The payment is the premium, which can be paid monthly or annually. These premium payments keep the policy in force, and if defaulted then you risk getting the policy terminated.
In the case that the policyholder dies while servicing the insurance cover, a death benefit will be awarded to the beneficiaries. In most cases the beneficiaries are the next of kin, most of the time it is the spouse and other family members. The death benefit assists the family in coping financially even after losing a breadwinner.
Tips for New Parents
With a brief description of what life insurance is all about, here are some of the great tips to always be remembered by new parents.
Term or Permanent Life Insurance
When it comes to life insurance there are two well-known types of life insurance; term life insurance and permanent life insurance. The difference is based on the duration of the coverage of the policy. As per the names, permanent life insurance is a lifelong commitment, it covers you for the entirety of your life. On the other hand, term life insurance covers the policyholder for a stipulated time duration. As parents, the best advice is to get permanent life policy for starters and along the way get to acquire term life policy for the child as they grow. Term life insurance will cover the child during her dependent phase.
Consider Education Expenses
A child is a whole human being who will have to go through the education system, just as you did. Education is quite expensive but you can manage to pay for it with the help of insurance even after you are no longer present.
Both Parents Are Supposed To Get an Insurance Cover
The stay at home parent is equally important as the breadwinner. So when taking up a life insurance policy the stay at home parent has to be covered too. The reason for this is that, if the child’s caregiver is gone then the surviving parent will use the death benefit from the loss to cater for expenses. The expenses might arise from acquiring professional childcare services and other miscellaneous expenses that come with child-rearing.
Don’t Name Your Child as a Beneficiary
Yes, life insurance is meant to safeguard the future of the child, but it is not wise to designate a minor as a sole beneficiary of the insurance benefit. As per the state’s regulations, there is a limit and how a minor is to get proceeds from an insurance policy. The best way to ensure the child gets the best out of it all is to allocate the beneficiary’s proceeds to an adult. The adult could be your spouse or any other person you closely relate to. This way the adult will play a key role in managing the money efficiently and effectively.
Involve An Insurance Agent
When looking for an insurance agent or an independent insurance agency, then make sure to look for the following traits: vast knowledge of the insurance industry, be an independent broker and finally has to have prior experience with matters similar to your case.
The work of an independent agent is to avail of a number of quotations made by the insurance companies and helping you in choosing the most affordable policy coverage. Apart from that, he should give you advice on the best life coverage that will suit your needs.
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