If you just started a new family, making sure you have the right life insurance policy is one of the most important things you can do.
Unfortunately, sorting through all the details and understanding the different types of life insurance can be complex. Here’s what you need to know about life insurance for new families.
1. Understand the Different Types
The most basic part of life insurance is understanding the available different types of coverage. The two main types of life insurance policies are whole life insurance and term life insurance.
Whole life insurance comes with a higher monthly premium, but it’s also a permanent form of coverage as long as you make payments. Reading a book or doing some research can help you understand the policy types better.
2. Consider all the Expenses
Before you decide how much life insurance you need, take all the potential expenses into account. If something happens to you, your loved ones will have to pay monthly bills, including mortgage, electric, and car payments. On top of these expenses, you also have to consider the costs of dealing with the death of a loved one and the unexpected expenses that may arise.
3. Don’t Make a Minor Your Beneficiary
You might want to make one of your children your beneficiary, but that’s a bad idea if they’re still a minor. If you name a minor as your beneficiary, they won’t be able to collect the money from your life insurance policy until they’re either 18 or 21. A minor's age to take control of property or finances through a life insurance policy depends on the state, but it’s always at least 18.
4. Create a Will
If you want to make sure your family is prepared if anything happens to you, take a moment to create a will online. Writing a will makes it easier for your loved ones to deal with your passing in a legal sense. If you’ve already designated who you want, which property to go to, and who you want to become legal guardians of your children, there’s not much to worry about, legally speaking.
5. Talk with Your Insurance Agent
At the end of the day, there’s only so much you can know as someone who’s looking to purchase life insurance. If you want to ensure you’re getting the best coverage for your family, you should talk with your insurance agent about your options. While whole life insurance coverage is best for some people, term life coverage may be a better solution for you, depending on your financial situation.
6. Consider Multiple Options
Remember that you’ve always got options when it comes to life insurance, so your best bet is to explore all the possibilities. Don’t decide on a policy prematurely; take time to compare rates from different life insurance providers and find a policy that offers the coverage you need with the lowest monthly premium.
7. Make Sure You Get Enough Coverage
One of the biggest mistakes you can make regarding life insurance is not getting enough coverage. You’re paying for peace of mind with life insurance, and you can’t put a price on that. Don’t skimp on your policy to save money on your monthly premium. Make sure you work with your insurance agent to get the right amount of coverage for your family.
Life insurance can seem complicated at first, but your agent can help you figure out what’s best for you. If you’re starting a new family and considering life insurance, follow these tips to make sure you get the right coverage.
Michael launched Wealth of Geeks to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.