Becoming a parent is a very exciting and life-changing process, bringing with it all sorts of new challenges and responsibilities.
When your family starts to grow, it is more important than ever to make sure that you’ve got the right measures in place should the worst happen.
In This Guide:
- What type of life insurance is best for new parents?
- What other insurance options are there for new parents?
- Do you add children to life insurance?
- Why life insurance is important when you're a parent
- Do you need life insurance after having a baby?
- How much will I need my new parent life insurance policy to pay out?
What type of life insurance is best for new parents?
Ok, you are a new parent and have decided to take out life insurance. What are your options?
A level term life insurance policy will pay out a lump sum to your beneficiaries should you pass away.
The amount that is paid out is a set amount, and selected when you take out the policy. The higher the amount, the more your premiums will be.
If you pass away after the term has ended, your family will not receive anything.
A decreasing term life insurance policy is often also referred to as mortgage cover.
This type of insurance policy offers a payout that will decrease in value over time. It is usually used to help your family pay off a mortgage should you pass away.
Your beneficiaries will only receive money should you pass away during the term.
Whole of life
A whole of life insurance policy will pay out whenever you pass away, as long as you keep up with payments.
Much like the name suggests, this type of policy doesnt have a fixed term, and you could theoretically keep paying it for the 'whole' of your life.
This is usually the most expensive family life insurance option.
What other insurance options are there for new parents?
There are other different, more specific, types of life insurance that are suitable for new parents. These include:
Family income benefit
A family income benefit policy is much like a decreasing term policy, except for the amount that is paid out doesn't decrease over time.
Instead, this family life insurance policy pays out for the rest of the policy term the same amount per month/year (should you pass away).
It is meant to act as a replacement for a lost income.
Joint life insurance
A joint life insurance policy will cover both you and your partner.
With this type of cover, if you or your partner pass away then the survivor and the rest of the beneficiaries will be paid out. However, at this point in time, the policy will then end.
If you want to ensure your beneficiaries are looked after should both parents pass away, it is worth looking into two separate policies instead of a joint life policy.
It can be cheaper to take out a joint policy than taking out two separate policies, but we recommend that you look at both options first though - it doesn't always work out cheaper.
Critical illness cover
Critical illness cover is usually an add-on for a parent's life insurance policy.
This add-on will pay out should one of the parents become diagnosed with an illness from a set list of around 30 or so specified illnesses.
Do you add children to life insurance?
Children don't usually get added to their parent's life insurance policy. A parent's policy is usually put in place for the benefit of their children, not the other way around.
It is sometimes also possible to get your children added to a life insurance policy with critical illness cover. This means that if your child becomes ill with one of the specified illnesses, you will be able to make a claim. Not all providers offer this though.
Why life insurance is important when you're a parent
Life cover is often seen as an unnecessary expense, especially when you are a new parent.
But should the worst happen, you will want to make sure your family is looked after properly.
Life insurance can help make sure your children and the partner you leave behind are looked after; that any debts and funeral expenses are dealt with, that any income lost from a parent's passing is covered, and they are given financial support.
Do you need life insurance after having a baby?
You don't 'need' to buy life insurance. But for the same reasons listed above, it is a good idea to make sure you consider how your family would be looked after should a parent pass away.
If you are pregnant, getting life insurance when pregnant is pretty similar to when you aren't expecting a child.
At Money Expert we have tried to make getting a life insurance parents policy as straightforward as possible - click the get a quote button below to get started.
How much will I need my new parent life insurance policy to pay out?
There are various things you’ll want to consider when working out the size of your life insurance policy as a new parent.
In general, you’ll want the value of your life insurance pay-out to be around 10 times the value of your annual income. This will of course this will depend on things like the size and age of your family, as well as whether or not you are the main earner in your household.
If you are not the main earner and say you spend most of your time at home looking after your children, then this should factor into the nature of your life insurance policy.
Your passing might, for example, mean that your household expenditure related to childcare could increase with the need to hire a childminder or to pay nursery fees.