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Life insurance policy for new parents – Is it possible to save money?

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You may be expecting your first child, you may have recently given birth to your first baby or you may be on your third. Being a parent, the question isn’t about whether or not you need an insurance policy but on which type you should buy, which company to purchase from and how you could get the most competitive price.

There are many misconceptions and mistakes that are committed while designing a life insurance plan for a client among which some of the most common are:

  • Buying the wrong policy by paying more money than needed
  • Not knowing exactly what it is and what you’re buying
  • Not knowing where the commissions and fees arise from
  • Underestimating the insurance amount you need
  • Overestimating the amount of money that you may need for life insurance

New parents – What kind of life insurance should you get?

The foremost step for buying life insurance is deciding the kind of insurance you may need. The 2 basic choices are i) Term life insurance and ii) Whole life insurance.

Option #1: Term Life insurance

This type of policy provides guaranteed protection throughout the term of the policy which is usually 1-30 years. Level guaranteed term life insurance is one of the most common types because the premiums remain same throughout the duration of the entire contract. When the contract ends, you will have enough ability to continue contracts but with an increased premium.

Option #2: Whole life insurance

Whole life insurance is an amalgamation of an investment and term life insurance. Whenever you pay your premium, a certain part is devoted towards the investment and the other part to the life insurance. Whole life insurance is permanent. Majority of the whole life insurance endows you when you reach 100 years of age and this implies that you obtain your death benefit when you reach your 100th birthday.

How much life insurance coverage should you get?

Life insurance gets complex when couples who purchase a policy don’t understand which to buy and how much to buy. So, when you start calculating the total life insurance that you may need, where should you start? The best thing to remind yourself about is the ultimate purpose of life insurance which is replacement of income. Stop to think what would your life be without your spouse? Who would help you in raising your children? What would be your income? There are several ace financial sites which advise you to buy somewhere between 5-20 times of your income while getting life insurance. A could with 3 kids already should have more life insurance as compared to a couple with one kid. If you rely a lot on life insurance calculators, make sure you answer the right answers before seeking help of a calculator.

Compare quotes from several life insurance companies

Now that you know the type of life insurance policy that you need and how much to buy, you will probably need to take the required steps to grab the lowest price. You can use Insuranks to compare free quotes before settling on the best one. Decide on the company from which you wish to get the insurance policy. Life insurance is a lifelong contract. What if your contract is about to end after 17 years and the company files bankruptcy in the 17th year? This is why you have to do a comprehensive research on the background of the company. One more thing you have to take note of is that settling down with the cheapest rate is not always the best decision to take as cheap is not always the best option.

Opt for your group insurance plan

When you need life insurance policy and your employer offers you a group plan, don’t you think this is a better option for you? Majority of the group insurance plans come issued with guarantee. This means there will be no such medical underwriting which binds the coverage. Moreover, there are many employers who pay 100% matched contributions to the group insurance plans and this is a free gain for the policyholders. So, you not only have to get insurance through your employer but you have to decide on the right amount.

So, if you’re a worrying new parent who is overly concerned about life insurance needs, you can take into account the above mentioned information and details before making a decision.

This post comes from the TODAY Parenting Team community, where all members are welcome to post and discuss parenting solutions. Learn more and join us! Because we're all in this together.