What Type of Life Insurance Is Recommended for New Parents

When you become a parent for the first time, there’s so much to do and so many new challenges to cope with.

Because of the flurry of activity surrounding any birth, it’s easy to forget some other important aspects that come with bringing a child into the world and securing its future.

Having a life insurance policy is one essential administrative task that it’s sensible to get out of the way sooner rather than later. But which kind of policy is best suited to new parents? Let’s look at your options.

Why Is Life Insurance Important?

The fact is that both married couples and single parents need life insurance, because without it, their death could lead to financial hardship for those in their family that they leave behind.

Any outstanding debts, such as a mortgage, will be a major burden in this context, so life insurance is designed to make sure that your little one is able to live comfortably if tragedy strikes.

What Kind of Cover Is Available?

There are two main types of life insurance to consider; level term and decreasing term. So what does each offer?

Level Term

A popular type of cover, a level term life insurance policy will be purchased over a set period, and will pay out a predetermined amount in the event of the policy holder’s death during this timeframe.

Some people prefer this type of life insurance because it lets them know the precise value of the policy, and allows them to plan around this.

The downside is that premiums for this type of deal tend to be higher, and there are of course exceptions and exclusions to take into account.

Decreasing Term

Focused primarily on paying off whatever is remaining of your mortgage in the event of your death, decreasing term insurance lives up to its name by shrinking over time in line with the scope of your debt.

The upside of this is that you’ll be able to pay a smaller monthly premium for this type of policy, but the caveat is that if you remortgage, the payout will no longer be sufficient to encompass the new, larger debt.

Furthermore, a decreasing term policy could be unsuitable for new parents in particular because it doesn’t account for the loss of income that’s inevitable after one of the breadwinners of the household passes away.

What Are the Other Options?

You can take your pick of a level or decreasing term life insurance policy according to your needs and your budget. However, you might also consider adding extra layers of protection, particularly if you have recently become a parent and are eager to provide for your child, even in a worst case scenario.

Critical illness cover could be useful in this context, and can either be snapped up as a separate policy, or combined with a standard life insurance package.

As the name suggests, this type of cover will kick in if a serious illness or accident leaves you unable to work. It will pay out a percentage of your usual salary for as long as it takes you to recover, or until you reach retirement age.

The Bottom Line

You’ll have to do a lot of research and compare life insurance quotes to get the best package, but this will definitely be worthwhile, whether you are already a new parent or you are expecting an arrival in the near future.

The right policy is one tailored to your needs, and working with an insurance broker can be a good way of answering some of the burning questions you still have.



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