We Have a New Baby! What Insurance Should I Get?
When you’re enjoying all the changes a new baby brings to your life, insurance is probably the furthest thing from your mind. If you are thinking about money at all, you’re probably wondering how much you’ll have to spend out of pocket for the delivery. And whether your income will support the cost of a crib, a car seat, formula, baby food, the cost of diapers and doctor checkups. If those are your concerns, check out the “Budgeting for a Baby” calculator at PracticalMoneySkills.com. [1]
But even further on the issue of money, you might also be wondering if the lady of the house will have to get a job or go back to work to support the $241,080 dollars [2] it takes for a middle-income family to raise a child for 18 years. And that doesn’t even include the cost of college.
Reviewing your insurance coverage before your new child arrives is good financial planning … and good parenting. There are only three kinds of insurance you need to consider, and this article explains why they are so critical.
· Disability Insurance
Some insurance sellers might tell you there’s a fourth kind of insurance you really need. They’re absolutely wrong, and we’ll tell you why as we go along.
Life Insurance
Take a look again at the $241,080 figure: that’s a lot of money. Adding the cost of college at a mid-range state school runs over $22,000, while a private college is double that – each year. Depending upon where your child goes to college you can easily add another $88,000 to $160,000 to the cost of raising a child – assuming your child graduates in four years. [3]
Life insurance protects your spouse and child(ren) in the event your earning power disappears because of your untimely death. It continues to pay the family’s living expenses, the mortgage and the costs of college. Determining how much insurance you need is the job of your insurance professional. He or she will want to gather some information from you, such as:
· For how many years you want your insurance policy to pay out.
· How many children you have (and expect to have) and their current ages.
· The amount of liquid assets (cash and securities) you have or expect to have at the time of your death, excluding IRA’s and 401-K accounts.
· Whether you want to provide for special one-time expenses – weddings, a new car, down payments for a house for your surviving spouse or child(ren).
These and similar questions allow your insurance professional to arrive at a policy value that will let your family continue living comfortably without your earnings.
Do both mom and dad need life insurance? Generally, yes. Even if mom does not work and add to the family’s income, she watches over the kids and takes care of the house. Should mom pass away, dad will be faced with day care costs, perhaps house-keeping costs and other expenses. If dad passes away his earnings will drop to zero, leaving mom to fend for herself.
It’s no fun to think about dying while you’re expecting a child or have just given birth. Yet leaving your family to struggle simply to live and make ends meet is unconscionable. Term policies offer you the greatest payouts for the least money, although some people still prefer whole life policies. Contact your insurance professional to plan for the best way to make the future bright for your new child and your family.
Disability Insurance
Actuaries know that you are more likely to become disabled than to die no matter what your age. During child-rearing years between 30 and 40 your risk for disability is the highest. At age 30 you’re four times more likely to become disabled than to die. At age 40, 2.7 times. [4]
Disability insurance pays a portion of your normal wage if you become disabled. Many employers offer disability coverage for a nominal amount. You should take it, especially during your younger years. (By the time you’re 55 that ratio drops to just 1.5 times). [4]
Depending upon the kind of work you do, you may be covered by Workers’ Compensation. It pays up to 80 percent of your normal wage if you are injured on the job. However, it does not cover, say, disability due to a car crash on the way to work. You must have been injured on the job. Workers’ Compensation insurance is paid by your employer.
However, if disability coverage it is not available from your employer, or your job is not covered by Workers’ Compensation, you can buy disability insurance on the open market. You can choose how much of your normal wage will be paid by the policy – 60 percent is a popular option, although you can choose higher values. An annually renewable disability income (ARDI) policy, which can be adjusted each year to reflect pay increases you might have earned, is always a wise choice. [5]
Once again, depending upon your employer and the kind of job you do, you may not need disability coverage. Contact your insurance professional for advice to assure your family will be protected in case of unexpected injury.
Homeowner’s Insurance
Homeowner’s insurance – sometimes called “casualty” insurance – is required by your mortgage lender. It protects the lender’s interest in the property by covering many hazards or perils, some of which include:
· Windstorm or hail
· Fire and lightning
· Vandalism or malicious mischief
· Theft
· Damage from vehicles and aircraft
· Explosion
· Riot or civil commotion
· Glass breakage
· Smoke
· Volcanic eruption
· Personal liability
Flood and earthquake coverages are usually provided on separate policies. Homeowner policies also pay for reasonable living expenses (“loss of use”) if your home is deemed uninhabitable.
The premiums for homeowner’s insurance are often paid as part of your monthly mortgage bill. The loan servicer then pays the insurance carrier on your behalf. Many people we speak with have no idea how much they are paying for homeowner’s insurance because the premium amount is “hidden” in the monthly mortgage payment. Working with an insurance professional, perhaps by reviewing your annual escrow statement, can reveal how much money you can save every month through a more cost-effective policy.
What You Really DON’T Need!
Some, shall we say, “hungry” sellers of insurance may try to sell you life insurance on your new child. They have access to public records, such as birth records, and often use the U.S. Mail and the telephone to try to convince you that you need to insure the life of your child(ren).
Life insurance is primarily designed for you and your spouse. It ensures that your dependents are properly provided for. Spending even a small monthly premium to insure your baby is, frankly, a poor use of your money. Instead, focus on an appropriate life insurance policy for you and your spouse to make sure your baby’s needs are met.
Looking for Some Help?
Quoteasy – We’re a team of insurance professionals who can make sure you have the best coverage for your family and your new baby. We’ll deliver the protection you want at the best rates and with every available discount. Call our friendly team at 305-587-2410. We’re here to help.
Source
(1) http://practicalmoneyskills.com/calculators/calculate/budgetingForABaby.php?calcCategory=budget (2) http://money.cnn.com/2013/08/14/pf/cost-children/ (3) http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064 (4) http://www.affordableinsuranceprotection.com/death_vs_disability (5) http://www.babycenter.com/0_disability-insurance_349.bc
