Family Life Insurance Overview
Family life insurance coverage is a combination of policies or riders that provide a death benefit if your family members die.
While there are a lot of life insurance products, a common misconception is that there is a package plan.
There is no package that will cover the whole family.
There are benefit riders that can provide some protection for spouses, children and grandchildren. Often these riders don’t fit your family needs.
It is challenging to cram enough coverage into the limitations of these riders.
As an experienced life insurance professional, I’ve come up with some best practices for families to consider when looking for a term life insurance policy.
Life Insurance for Your Spouse
Family life insurance most commonly includes coverage for your spouse.
Consumers often ask me if there is a package policy I can get for the entire family. While there are options to purchase add-ons to cover spouses or children, it’s recommended to purchase a life insurance policy on each individual.
These add-ons, also known as riders, provide limited protection. Although using a rider is a budget-friendly way to obtain family life insurance protection.
Couples should take a look at the need for coverage on each partner. Not just the breadwinner! A stay at home spouse contributes to the household financially.
It is wise to consider coverage above and beyond what is offered at work. Securing supplemental life insurance will give your family the best protection.
Life Insurance for Your Children
Parents vary on their thoughts about child life insurance.
The biggest reason to secure a plan for your kids is to protect their future insurability. If your child develops a serious health condition during their childhood they may be uninsurable or subject to higher priced rates as adults.
If they have a plan that was locked in while they were babies than they can take it with them into adulthood.
Parents can always discontinue the plan once their children between the ages of 18-25. This is the time-frame I recommend young adults secure term life insurance.
If they aren’t at a stage of life where they can afford the premiums, parents can always carry the plan until they are ready to take over the payments or get their own.
Child life insurance riders are the most affordable means of this family protection. Regardless of the type of plan, it is good to have in the unfortunate event parents lose their child to premature death.
Having the funds for a proper funeral and to cover medical expenses helps them grieve without the financial stress.
Life Insurance for New Parents
Becoming a parent adds a lot of new responsibilities to your life!
Getting family life insurance should be a priority on your to-do list. The best thing you can do for your new child and partner is to plan for the worst.
This can be hard to think about no matter how long you are a parent.
Securing life insurance as a new parent doesn’t have to be scary.
My suggestion is to use a life insurance needs analysis or calculator. This will help you see the amount of coverage you would need for your family to be alright financially if you die while your children are young.
Since most families are just starting out, this is the time you will have a need for a larger coverage amount.
As times goes on and you build your assets, you can reduce your life insurance needs.
Although that may not be to all your children are off to college!
Life Insurance for Stay at Home Parents
This is hands down the most overlooked area of family life insurance planning.
Too often families are focused on getting the breadwinner of the family life insurance in place. While this is very important, it’s critical to understand what happens financially if the stay at home parents dies.
There’s a lot of financial value a stay at home mom or dad bring to the household.
Just think how much it would cost to hire out all the things they do for their families. Be sure to grab a big sheet of paper because a sticky note isn’t going to cut it.
The list is simply too long.
Just think about the amount of needed insurance to cover child care costs.
An important consideration is not all families have extended family members that can step into their role. Some may have the time but not the money to leave their jobs.
If they do it can help significantly. Households need to consider whether or not the surviving partner will be able to continue working and juggle household responsibilities.
Life Insurance for Single Parents
Single parents should make sure they have enough life insurance to provide financial security for the family.
They must consider that there is no surviving parent to pick up where they left off financially.
Although many single parents have built a strong network of family and friends, it’s not always realistic to think these people can carry the financial responsibilities of raising their children if they die prematurely.
They should also utilize estate planning services to set up the desired guardianship for their children. They can make sure the beneficiaries on their plans are set up accordingly.
Life Insurance During Pregnancy
Many families begin their life insurance planning when they start their family.
Obtaining life insurance during pregnancy may not be as easy as you think. If a woman is considered high risk or develops a pregnancy-related health issue, the insurance company may postpone their request for life insurance.
It is always a good idea to secure life insurance before you become pregnant or early into your pregnancy.
This will ensure you have the best chances for approval and get a good price.
Life Insurance for Divorce
As divorce rates continue to rise, we all know that not all families stay together.
Many times family life insurance planning happens during divorce negotiations.
Attorneys can mandate for parents to carry a certain amount of life insurance. They can also mandate the time-frame as well as the ownership and beneficiary.
Consumers who are shopping for life insurance during a divorce often seek policies with no medical exam.
Usually, because the request is time sensitive.
No exam life insurance is typically available up to $500,000. If you need more than that to satisfy a divorce requirement, you can purchase more than one non-medical policy or go through traditional underwriting.
Life Insurance Trusts
A significant part of family protection life insurance involves using an attorney to create trusts when needed.
Commonly, these trust can help parents establish a trustee that is aligned with their guardianship desires in their estate plan.
Trusts can be named as a beneficiary on a life insurance policy.
Either as primary or back up. An example would be if each parent were to name each other as a primary beneficiary but then the trust as a backup. If both parents pass away the trust is paid the life insurance benefit.
There are lots of offers out there for buying life insurance.
It’s hard to know whom to trust and which plan will off you the best deal. Keep in mind that cheaper is not always better.
A plan that fits within your budget and provides the most life insurance protection for each individual in a family should always be the goal. Whether it’s the breadwinner, stay at home parent, single parent or child who dies, you need to make sure your family won’t struggle financially.
Enlisting the helping of an independent life insurance agent can help you design a portfolio of plans that will protect the entire family.