In the first year alone, a new baby can cost upwards of $8000. Over the course of 18 years, your little bundle of joy could come with a price tag of $180,000 – $270,000 in total child-rearing costs. If you were to pass away unexpectedly, a life insurance policy would keep your little one fed, clothed and safe in the loving home you created.
If you love your family and want to protect them from any financial hardship after you’re gone, you need life insurance. Below is a list of everything parents need to know about protecting their children should the unexpected happen.
1. Don’t Procrastinate
The best time to take out a life insurance policy is before you have a baby. Preferably long before. The second best time is right now. The younger and healthier you are, the cheaper your premiums will be.
While you can get life insurance at any point in your pregnancy, the amount of weight you gain or pregnancy complications could affect your premiums. Pregnancy aside, insurance becomes more expensive the older you get. If you already have kids, it’s never too late to protect them.
You also don’t want to wait until after you have the baby either. While the vast majority of pregnancies have happy endings, some don’t. There could be lasting effects from pregnancy complications that make you harder to insure. And should something terrible happen to you during labour and delivery, your loved ones will still be protected.
2. Get The Right Amount Of Coverage
The best way to protect your family is to know how much coverage you need in order to maintain their current standard of living. Generally, you want enough coverage to pay for:
- Funeral Expenses
- Outstanding Debt
- Child Care Costs
- Your Children’s Education
- Replace Your Income
If one parent plans to stay home to care for your children, you’ll want a life insurance policy on them too. You may not realize it now, but you depend on your partner for all the domestic responsibilities that go along with keeping a home and raising a family.
How would you cope with the loss of childcare while working full time, for example, should your partner suddenly pass away? Many families choose enough coverage to replace not just their lost income, but the lost financial value of domestic work a stay-at-home parent contributes.
3. Don’t Depend On Your Employer’s Benefit Package For Life Insurance
If you’re working right now, you likely have some life insurance coverage through your employer’s benefits package (known as group life insurance). But it’s highly unlikely that you have enough coverage, at least not for this stage of your life.
Most group life insurance policies pay significantly less than a private life insurance policy. The industry-standard lump sum payout is roughly three times your annual salary, depending on how robust the package is. That’s probably not enough to cover your mortgage, debts and maintain your family’s quality of life.
Not only that but if you quit or get fired you lose that coverage. You cannot take it with you to a new job. Start by contacting your HR department to find out exactly what you’re covered for as well as all the conditions and restrictions. If you’re the one expecting, ask how your coverage is affected by your pregnancy. And most importantly, how will your parental leave affect your coverage?
4. Know The Difference Between Permanent And Term Life Insurance
There are two kinds of life insurance out there. Permanent life insurance, known as universal or whole life, and term life insurance. Permanent life insurance covers you for your entire life and pays out a lump sum benefit to your beneficiaries no matter when you die. If you live to be 112, you’re still covered. Term life insurance only covers you for a specific period of time, anywhere from 5 to 30 years.
The one that’s right for you depends on your needs and budget. Permanent life insurance is often more expensive since the insurance company knows you are definitely going to die eventually. Term life insurance tends to be a lot cheaper since you may or may not die during the term. But if you choose to renew at the end of your term, or convert to a permanent policy, your rates will increase.
Permanent life insurance will give you peace of mind knowing your loved ones will be taken care of no matter when you pass away, and your payments will never increase. But term insurance can give you the coverage you need right now when your children are young and unable to take care of themselves. The payments are also much easier to handle during this high-cost period of your life.
5. Buy The Kind Of Life Insurance Policy You Can Afford
We all want the very best for our children. But you don’t need to have the Peg Perego of life insurance policies for your family if you can’t afford it. We typically have children earlier in life, when our incomes are lower and our debt loads are higher. Children also tend to be a lot more expensive in their early years. We understand that money is tight right now. That’s all the more reason to get insurance.
But if your wallet is feeling the crunch, it's ok to get the bare minimum because some coverage is better than no coverage at all. As long as you’re not relying solely on your group life benefits (if you have them), you can buy supplemental life insurance that still protects your family but at a price you can afford.
Basically, you want your private life insurance to be the main course and for your group life insurance, if you have it, to be the side dish. Term life insurance is a great option for young families or those with lower incomes.
6. Should You Insure Your Child?
That’s an extremely personal decision. But for most people, it’s an unnecessary expense. Life insurance is designed to replace lost income. Is your child sipping designer espresso on the GoTrain to Bay Street? Not likely.
If you’re a new or expecting parent, you’re probably really worried about SIDS, right? Of course! Every parent is. Losing your precious peanut to Sudden Infant Death Syndrome would not only be traumatic, it would also have a financial impact. You would need to pay for a funeral and have time to grieve. And we never stop worrying about our kid’s safety, no matter how old they are (welcome to parenthood!).
Or perhaps you’re worried that your child might develop a serious health condition that would make them difficult to insure later in life? The truth is, SIDS or a life-long serious health condition are both incredibly rare. You are far more likely to pass away than your child. That money could be much better spent elsewhere like investing in an RESP or TFSA.
Who Is PolicyMe And Why Do You Need Them?
As a parent, you already know it’s not just about you anymore. You have a tiny human depending on you now (or maybe some not-so-tiny humans). When it comes to having a baby and raising kids, you have enough things to worry about. Choosing the right kind of life insurance shouldn’t be one of them (too bad you can’t put it on the baby registry!).
PolicyMe is every parent’s best friend. No one has time for the tedious, slow, overly complicated and uncomfortable process of applying for life insurance coverage. Gone are the days of administrative hoops and mind-numbing health questionnaires. PolicyMe is a digital life insurance company that has completely revolutionized how Canadians shop for insurance.
With PolicyMe you have access to instant online quotes. You can also apply online and get approved in minutes. How do they move so fast? Because they’re not insurance brokers. They’re a bonafide insurance provider offering the most comprehensive coverage for your budget.
Their agents work tirelessly and commission-free so you know you’re getting the best policy for your needs (not the best policy for someone else’s paycheque). And they’re licensed to serve you in almost every province except Quebec, New Brunswick, Newfoundland and Labrador, and Saskatchewan.
With PolicyMe, you’ll have peace of mind knowing you’re getting exactly what you need without all the unnecessary bells and whistles. They are with you every step of the way and they even have a resource hub with the answers to your insurance questions. And you can do it all from the palm of your hand. Spend less time shopping for life insurance and more time sleeping when the baby sleeps (hopefully!).