From the moment they enter the world, ensuring your children’s wellbeing and security is a top priority for parents. We do our best to keep them from falling down stairs, tripping on sidewalks, running into traffic, choking on grapes, and every other hazard within our capacity. We’re basically bodyguards for our babies.
But when it comes to finances, it’s easy to overlook the things that could harm our kiddos in the future. The future might seem out of your control… but there are ways to safeguard your children’s wellbeing even if the unexpected happens.
And it’s through life insurance.
Life Insurance: A Financial Safety Net for Your Family
Life insurance offers a safety net for your family by providing financial support that can help cover daily living expenses, debts, and other financial obligations if you’re no longer there to provide for them.
No one wants to think about life’s uncertainties or worst nightmares coming true, but life insurance is about even more than that. It’s about creating a stable foundation for your children’s future. It’s about ensuring that your children continue to receive the care and opportunities they deserve, no matter what happens.
Demystifying Life Insurance Options
There are two main types of life insurance—term and whole—and it’s important to understand the difference between the two before you go shopping around.
- Term Life Insurance offers affordable, temporary coverage for a specific period (hence, “term”), usually 10, 20, or 30 years. This type of insurance is ideal if you need to cover specific financial responsibilities, like a mortgage or college tuition, and want a higher level of coverage without a hefty premium.
- Whole Life Insurance provides lifelong coverage and includes a cash value component that grows over time. This cash value can serve as a financial resource, supplementing other savings and funds you have. Whole life insurance is typically more expensive than term, but it does offer additional benefits and long-term security.
You can talk with your local independent Wichert agent about which policies are right for your family, your current financial situation, and your long-term goals.
How Much Life Insurance Coverage Do You Need?
To calculate the right amount of coverage, there are four main factors to consider:
- Income Replacement: How many years of income your family would need to maintain their current standard of living.
- Outstanding Debts: Mortgages, car loans, or other debts that would need to be paid off.
- Education Costs: Future expenses such as college tuition.
- Future Needs: Additional expenses, like healthcare, childcare, everyday living costs, weddings, and so on.
A common approach is to multiply your annual income by 10 or 12, but individual circumstances vary—work with your Wichert agent for help crunching the numbers to ensure you have sufficient coverage.
Naming Beneficiaries
A beneficiary is the person or people who will receive the proceeds of a life insurance policy. It's important to designate a trusted guardian for your children or set up a trust, which can manage and distribute funds responsibly until your children reach adulthood.
This careful planning makes sure that your life insurance benefits are used properly for your children’s wellbeing. After all, think about what your 10-year-old would choose to buy if they had access to more than their weekly allowance.
Using Life Insurance for College Savings
Whole life insurance’s cash value accumulation can be an excellent supplement to college savings plans. Over time, the cash value grows tax-deferred and can be accessed if needed to cover higher education costs.
Joint Policies vs. Individual Policies for Parents
There are joint life insurance policies available for couples, which can be a more cost-effective option and simplify the management of your coverage. However, individual policies offer flexibility and ensure that each parent’s unique needs are addressed.
Your Wichert agent can help you evaluate your family’s financial picture and long-term goals to help you determine which of these policies is the best route to take.
Affordable Life Insurance Options for Young Families
Yes, of course you want to take care of your family’s future needs… but there’s only so much money in your budget. How are you supposed to afford one more monthly expense?
Fortunately, many term life insurance policies offer high coverage levels at an affordable cost. We can explore the different options and help you choose the right one that aligns with your budget and future plans.
The Role of Riders: Child Protection and Disability Coverage
Life insurance riders are optional add-ons to an existing policy. Think of a life insurance rider as a tow-behind attachment to carry your child on a bicycle.
Riders add extra layers of protection to your policy and can include:
- Child Term Riders: Coverage for your children under your policy, offering financial support for education and other needs if they face unforeseen challenges.
- Disability Income Riders: If you become disabled and can’t work, these provide income to help maintain your family’s financial stability.
- Waiver of Premium Riders: If you become seriously ill or disabled, this rider can waive your premium payments, keeping your policy intact during challenging times.
Keep Your Policy Updated As Your Family Grows
New children, job changes, and home purchases are all occasions to reevaluate your life insurance policy needs. It’s important to regularly update your policy so that you can make sure it will provide adequate protection as your financial responsibilities evolve.