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There comes a day for many couples when they are ready to start a family. What comes next might just be one of the most important phases of your life. However, parenting can also be one of the most expensive things you take on as a couple. Looking after every expenditure of a child from the time they’re a baby until they graduate from college can cost as much as $234,000.
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If you are your family’s breadwinner, you definitely need to be thinking about securing your family with life insurance as soon as possible. If something were to happen to you, your spouse would need to be emotionally strong. Moreover, they would also need to take care of all the parenting duties as well as your family’s finances in your absence.
If you own a business or you are a single parent, it is even more important for you to maintain a financial provision for your family. It is your responsibility to your children and your spouse. In situations such as these, what you need to do to secure your family financially is purchase life insurance.
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However, before you buy life insurance online, there are the four basic questions you should ask yourself:
1. What Is Your Financial Situation and Planning at Present?
Before you think of any new investments or even buying an insurance policy as a parent, it is always best to gauge your current financial position. Evaluate your current earnings. Then, account for all of your family’s assets, such as gold and real estate. It is important to know where you and your family currently stand financially.
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2. How Much Life Insurance Will Your Family Need?
Create a valuation figure for yourself. Include everything you own and earn at present. Then subtract from it from all the expenses you think will be coming to you and your family soon.
Next, count expenses for your children. As a parent, you know, for example, their present schooling expenditures. Estimate the costs of their future studies, weddings, and routine medical expenses. Of course, be sure to plan for an emergency fund for unforeseen scenarios. Do not forget to factor in the inflation rate.
Once you have an estimate for most of the current and future financial obligations your family might have, it will be easier to decide upon your desired coverage for a life insurance policy.
There is no real formula to this. However, estimating on the higher side will always be beneficial over choosing coverage that does not quite suffice.
3. How Many Types of Life Insurance Are There and Which One Should a Parent Choose?
A life insurance policy guarantees security for your spouse and kids in your absence. Deciding on the type of life insurance you need is easier than you might think. (It is certainly easier than everyday parenting overall!) You can choose between the different types of life insurance, such as a term plan or a permanent plan.
If you’re having trouble deciding, these definitions can help:
If you have a restricted budget when it comes to insurance premiums, then a term plan could be a great buy. It offers good coverage for very low initial premium amounts. It is also an ideal plan if as a parent you have temporary needs.
If you and your spouse are currently parenting your parents as well as your kids, then a permanent plan might be more suited to your needs. You will get lifelong protection with this plan. Additionally, you will also have a choice to accumulate cash values that are tax-deferred. This can benefit your loved ones as well.
Nonetheless, before you decide to buy life insurance online, consult an insurance advisor. Be sure to get all your questions answered and get your facts straightened out before signing on the dotted line. An expert will offer you unbiased judgement and help you make a clearer decision. After that, you can simply calculate your premiums and buy life insurance online with just a few clicks.
4. How Long Do You Need to Maintain Coverage When You’re a Parent?
To be able to answer this question, you need to know how many years of mortgage payments are still left on your home. You also need to estimate how long you will be parenting your children. In other words, how long will your kids need you financially?
Also, consider how long it could be before you decide to retire, as well as other such questions. Answering these questions will make it easier for you to decide on the tenure for your insurance policy.
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For tax-paying citizens in India, tax deductions are available on the annual life insurance premiums you pay toward your policy. Under section 80C of India’s Income Tax Act of 1961, you can take advantage of a deduction of up to 1,500,000 rupees under the old tax rules.
This amount includes all payments and/or investments listed in this section, including yearly premiums toward your life insurance policy which do not exceed 10% of your overall sum assured. (Unfortunately, similar deductions are not available under US tax law.)
Starting a family and parenting children can be difficult in the absence of one parent. It can be emotionally challenging, too. However, with the right life insurance plan, you can save your family from financial stress and support them in their tough times, even in your absence.