Last Updated on November 15, 2024
Starting a new family is an exciting adventure and a very rewarding experience. Becoming a new parent adds a completely new meaning to life. It means that you no longer live just for yourself, but also for the new family you’ve created. This also means that it’s time to consider ways to secure their future under any unforeseen circumstances.
The to-do list for new parents can be endless but one item definitely worth your attention is life insurance. Now finding life insurance with diabetes may be a little challenging. It’s important to work with people who are diabetes life insurance specialists, such as us! Diabetes 365 was started to help those in the diabetes community obtain affordable life insurance coverage.
It’s important to ask yourself the dreaded question – ‘what will happen to my little one if I die?” One solution is life insurance.
Quick Article Guide
Here’s what we’ll cover in this post:
Why Should New Parents Get Life Insurance?
Becoming a new parent means that you have someone dependent on you. Life insurance ensures that your dependent loved ones are taken care of financially in the event that you die. You can support your family even when you’re not there through your life insurance.
Many jobs come with life insurance but they’re very limited. Plus, they’re linked with your job and once you leave, they may still not be available. Also some group life insurance policies will not consider those with type 1 diabetes, type 2 diabetes, nor gestational diabetes. Considering that you have a new one in the family, who will be needing financial support for a long time, it is a good idea to get life insurance coverage outside of the workplace.
One more point to note is that it’s better to get life insurance sooner than later. The older you get, higher the premiums become. Hence, it is most sensible to get insurance at the earliest to get the best deal to secure your newborn’s future. Life insurance premiums are partially based on your age at the time of application.
Here’s a simple example of how life insurance coverage works: You get a life insurance policy of $1 million with your spouse as the beneficiary. In the event that you die, your spouse will be entitled to a $1 million payout. This amount can take care of mortgage and daily expenses as well as your child’s education. Death benefits from life insurance policies can be used however your family needs to use the money. Best part of this is the death benefit is paid in a lump sum tax free payment to your beneficiary.
What are the Life Insurance Policy Options Available to New Parents?
Broadly speaking, there are two types of life insurance policies – term life and whole life.
Term Life Insurance Policy:
This type of policy requires you to pay a monthly premium and is valid for a certain ‘term’ or fixed period of time like 10, 20, 25, 30, or 35 years. If you die within this term, your beneficiary will receive the payout. Should you live beyond the initial term period, you could always reapply for coverage. Or convert all or part of the policy to a form of permanent insurance.
Permanent Life Insurance Policy:
This type of policy doesn’t have any fixed ‘term’ for payout. It pays out whether you die the next year or in 20 or even 50 years. The policy, if properly designed, will cover your entire life. Many types of permanent life insurance accrue cash value over time, that can be used in a number of ways in the future.
Term vs. Permanent Insurance
If you’re in the market for life insurance, you may be torn between purchasing a temporary (term) or a permanent (whole or universal) life insurance policy.
Source: Quility
Which Type of Life Insurance is Best Suited for New Parents?
Typically, for new parents, Term Life insurance policies are most suited. Following are the reasons why:
- Term life insurance is usually cheaper than whole life insurance. It can vary from 3-10x cheaper. This is huge factor for new parents considering that having a new child can already be expensive.
- If your goal is to ensure that your child receives financial support till he or she is financially independent, then it’s relatively simple to calculate the appropriate term for your policy’s payout.
- While permanent life insurance comes with an investment component, you could use the difference between its cost and that of term insurance and invest it elsewhere. This gives you a lot more control over your investment and you can likely generate higher returns.
However, there are also cases in which permanent life insurance may be more apt.
- If you want to provide lifelong coverage for your child, such as in the case of a child with disability.
- If you are wealthy, permanent life insurance can serve as a useful tool in estate planning. The payout can help your heirs cover any state or federal estate taxes.
What is Flexible Term Insurance and How can it Help New Parents?
While Term Life Insurance is ideal for most new parents, it also comes with a number of limitations. Once you select a policy, you’re practically locked into it for that period of time. This can be tricky because it means that at the time of taking out the policy, you need to have a clear idea of your and your family’s financial situation over the next decade or two or more.
However, life is dynamic and your finances may change over time. Hence, your coverage should also change accordingly. This is where flexible term life insurance or laddering comes handy. It provides you with the option of decreasing your coverage as time passes and with that, your premium also decreases by the same proportion. In our opinion, if you do not need a specific amount of life insurance coverage, why pay for an amount that is larger than your needs?
Here’s how this works – Once your child grows up and their financial dependence on you decreases or you clear your mortgage earlier than expected, you can decrease your term coverage through a simple process. On the other hand, if you decide to have another baby or your living expenses increase, you could bump up your coverage.
Having the option to decrease or increase your coverage over the course of the term can help you adjust your premium payment too. This is a smart financial strategy that can help you save a lot of money over time and also keep your loved ones covered.
How Much Life Insurance Coverage Should You Buy?
Calculate your family’s financial needs that need to be provided for if you’re not around. Here are some steps:
- Think about the number of years of income your life insurance should replace. Multiply your yearly income to that number.
- Consider other financial obligations like education expenses and debts
- Add up the cost of extra services you provide to your child that would have to be replaced.
- Minus the other life insurance coverage and savings you have
Here’s a great online life insurance calculator, that we love to share with others:
Life Insurance Needs Calculator
Should Both Parents Get Life Insurance?
It is always better that both parents get life insurance. Whether your partner and you are both earning, or whether one of you is and one isn’t, it’s important that you consider life insurance for both parents.
There’s one simple logic to this – child support isn’t provided only in terms of the dollars earned. The death of a parent doesn’t only directly affect the financial support of the child, but also takes a toll on other childcare needs like cooking, transport and managing a home. This support will also have to be taken care of if a parent dies. A second life insurance can make a huge difference in helping the family maintain its standard of living in the event that either parent dies.
What Are the Beneficiary Options for Single Parents?
While considering life insurance policies as a single parent, one important consideration is to figure out who the beneficiary for your payout will be. Policies don’t pay out to minors so your child won’t be entitled to it till they become an adult. It’s best to consult with an attorney to set up a trust to ensure your child or children are taken care of when you’re not around. It isn’t complicated, but it’s important that you do this right.
What Affects the Cost of Life Insurance?
While the cost of insurance depends on the type of policy, the length of the term and the coverage amount, there are also some other factors that affect the price. Your type of diabetes, and level of control will also play a big part in determining your rates.
These are basically the risk factors that increase the chances that you may die and your insurance will have to pay out. They include your age, health status, smoking habit and any risky hobbies or occupation.
In Conclusion:
New parents should definitely consider getting life insurance to provide their new child with the best support. Obtaining a policy is one of the most important financial steps to make, as your family grows.
Get and compare quotes from different insurance companies from us. It’s always best to take the help of a financial consultant to figure out the best options for your specific situation. Especially when you live with Diabetes. Don’t let other websites lie to you with false or misleading rates. Trust us, like how thousands of others with diabetes have.
