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Health Care
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Your Financial Life
By Transamerica / Aug 31, 2015

New Baby on the Way? Time to Consider Life Insurance


The birth of a child: it’s one of the top reasons people look into buying life insurance¹, and it’s easy to understand why.

A new baby is a source of joy, the object of your hopes and dreams — and just as often, of your worries. Fortunately, life insurance can help protect your family in the event of your unexpected death, providing a strong financial foundation for your loved ones.

Where to start:

The first thing to do is determine how much coverage you’ll need. One rule of thumb: multiply your current salary by at least 5x, add any debt, plus the cost of college tuition (according to the College Board², the average cost of tuition and fees for the 2014-2015 school year was $31,231 at private colleges and $9,139 for state residents at public colleges). For a full-time, stay-at-home parent, replace salary with the cost of hiring full-time childcare.

Some parents-to-be enjoy group term life insurance coverage through an employer. That’s great — but it’s important to consider your true coverage needs and address any gaps, which can be significant. Also consider that most group coverage is not portable when you leave your current employer.

Term or perm?

Your next decision should be whether to buy a cost-effective term policy that provides coverage for a fixed amount of time, or a permanent life insurance policy that never lapses as long as you pay sufficient premiums.

Things to consider:

• Because of its competitive cost, term life insurance is a common option for new families. During the initial level term period — typically 10, 15, 20, 25 or 30 years — your premium is guaranteed to remain the same. It’s a great way to get as much coverage as you can afford during the years you need it most: when you have dependents, and often significant mortgage debt.

• Permanent life insurance, on the other hand, never lapses, no matter your health condition, as long as sufficient premiums are paid. It has a cash value that has the potential to grow over time, tax-deferred, so it can continue to help protect your family.

Permanent life insurance can be more expensive than term so you may want to consider a convertible term policy. The term policy can later be converted to a permanent one based on your health status at the time your policy was originally issued. Be aware that premiums may increase with a new policy.

Life insurance is just one of the important financial issues new parents should be sure to address when a baby’s on the way. Some other tips to help prepare for a baby’s arrival:

Set aside at least 3-6 months of living expenses for a family emergency fund.
Begin planning for increased expenses as well as possibly reduced income.
Establish a will that names a guardian.

Finally, while it may seem premature, financial experts generally advise new parents to get their retirement plans in place before setting up a college fund, which is sometimes more top of mind. Remember, your child can always get a loan for college, but no one will give you a loan to retire. Life insurance can play a role in your retirement plan — talk to an insurance agent or financial advisor to find out more.

When to get started

The best time to buy life insurance is as soon as you’ve identified a need. Premiums are based on age, overall health, and other factors. You’ll never be younger than you are today.

Take advantage of the time you have now, before your baby takes center stage. Once your newborn has arrived, you’ll want to spend every moment listening to his or her coos — or catching up on much-needed sleep!

So if the stork is headed your way, gain the peace of mind that your baby’s Tomorrows will be protected, for better or for worse.

Use Transamerica’s Insurance Plan Explorer to help determine your coverage needs and get a quote for term life insurance.

You can also speak directly to an agent at 1-800-209-8913, or via email.

We are the Tomorrow Makers®.

¹LIMRA 2011 To Shop or Not to Shop for Life Insurance: Turning Shoppers Into Buyers, Cheryl D. Retzloff, LLIF, ACS