It's called life insurance, not baby insurance
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You get a lot of things when you have your first kid – furniture to put together, unsolicited parenting advice, many sleepless nights, and...life insurance?
Without fail, one of the major life events that spurs the purchase of life insurance is a newborn. It makes sense, and it’s a smart thing to do, but it’s not the only time you should do it. After all, it’s called life insurance, not baby insurance – why limit yourself to when you decide to buy it? There’s a whole host of other reasons to buy life insurance, and most of them don’t center around your firstborn.
Have private student loan debt? Maybe you went to grad school, or maybe it’s just the increasing cost of college getting to you. There’s a good chance that you had a family member co-sign that loan. Most people going to grad school can’t get private loans without a co-signer.
While your co-signer – maybe a parent, maybe your grandparents or another relative – probably doesn’t pay any of the monthly bill, they’re still responsible for the debt. If you die, the debt doesn’t die with you. In fact, your co-signer will become solely responsible for finishing payments.
If you are the primary person responsible for your debt, you should buy life insurance for yourself and name your co-signer the beneficiary. If you’re the co-signer, you can consider buying life insurance for the student and naming yourselves the beneficiary. (Life insurance companies allow you to take life insurance policies out on other people if you can prove you have a vested interest in them staying alive.)
Even if you’re not planning on starting a family, life insurance can still be important to you and your partner. If you have any shared financial responsibilities – a mortgage or a car, for example – life insurance can help protect your spouse from dealing with the bills on their own.
But if you are planning on starting a family, you don’t need to wait until you bring your first bundle of joy into the world. You should still get life insurance once you get married. You’re still young and healthy, and by the time you end up having a kid, you’ll be too busy and overwhelmed to go through the life insurance shopping process.
If you bought a house with a partner and took out the mortgage together, you should definitely get life insurance for the length of the mortgage. Mortgage payments can be hard for two people to handle, let alone one, and the missing income can ruin your surviving partner’s retirement plans.
You’ve likely talked about end-of-life plans with your business partners (and if you haven’t, you should). Life insurance is a great way to help keep the business afloat in the event of your untimely death; it can help cover the costs of the inevitable disruption a business goes through with the passing of a partner, can allow the remaining partners to find a new partner, or can provide the funds to allow your partner or family to close the business. It’s a necessary part of your larger business plan.
If you’re solely responsible for taking care of an elderly parent or relative, you’ll want to get life insurance. This also applies if you’re the caretaker of a child with developmental disabilities. You probably won’t want to leave the money directly to the person you’re taking care of – instead, the money should go to your spouse, a sibling, or into a trust that you set up with the sole purpose of providing for your relative.
If your sibling or other relative is a caretaker for either an elderly parent or disabled child, you may want to set up a life insurance policy that names them as a beneficiary. In the case that you die, this would be your way of providing them with income to help take care of your relative.
Having a kid isn’t the only reason to buy life insurance, but it’s still a good one. Kids are expensive, and your partner probably doesn’t want to do it alone. In the case that you die young, life insurance can replace two major things:
Your potential income
You should prioritize buying life insurance before your first child comes for a reason that might not be obvious: many women gain weight during pregnancy and weight more after giving birth than they did before. That part seems like a no-brainer, but because weight is such a reliable indicator of future health, it factors heavily into how the insurance company estimates your mortality risk. This is why you can be rated in one risk class the first month of your pregnancy but end up in another one by your ninth month; insurers will treat your current weight as your standard weight, meaning those extra pounds post-baby can end up costing you.
If you’re looking for an excuse to get life insurance, you have a lot of opportunities. While a baby is a good indicator that you probably need life insurance – you have another dependent that would benefit from the safety net that insurance provides – don’t overlook other important events that might necessitate it as well. You might be surprised at how many risks you’re taking by not being insured already.
Image: Jorbasa Fotografie
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