Life insurance when a child is born
[social_share]When a child is born, particularly when the first child is born, is a good time to reconsider how much life insurance is needed.
Most people find that their life insurance coverage is often in danger of lagging their life insurance needs. This is because life insurance coverage is not reviewed often enough, and in many cases people are not entirely certain how much life insurance the actually have. At a minimum life insurance should be reviewed once every year. The life insurance review should look at the likely costs that will come on if a person were to die, what support the dependents would need and what is the current life insurance coverage as well as savings. If this coverage is too low then the options are to either increase savings or life insurance cover.
It is also a good idea to increase life insurance when there are certain events. These life changing events are when the life insurance needs are likely to increase or fall. These include marriage, children being born (particularly a first child) and children leaving home or going to college.
With the birth of a child two things happen to a family’s financial situation. The first is that the children have their own financial needs. At first it will only be for things that a small child will need but over time there are predictable costs such as college fees and student living costs. There is also likely to be one of the two parents taking on a less active role in the work place in favour of a more active role at home. This will mean that where a couple may have not needed that much life insurance before, as the income of one party could support the household, they will need more life insurance as although the income of the main wage earner may rise if this person were to die or become disabled then the income of the household would suffer.
A couple should also consider disability insurance as well as life insurance. Most married couples without children can probably do with a version of life insurance that will pay off mortgage debts and funeral costs in the event of a death. However if a person is the main bread winner then they may find that they need the life insurance to have a disability option in order to cover any lost wage.
