Special Considerations for Young Families
Having children is one of the biggest incentives for young couples to consider purchasing life insurance. They recognize that as there are more people dependent upon them for financial stability, their needs may not be properly addressed anymore. One of the things many young parents overlook is covering both spouses -- even if one stays at home and does not generate an income. In the event of their death, the surviving spouse would be the sole provider of all of the household's requirements.
When determining the amount and type of life insurance appropriate, make sure you consider the costs of child care -- especially for children under 5 years of age and those with special needs. These costs can be more than you imagine, so take the time to calculate them accurately, and factor them into your decision making.
Consider whether you need whole life or term insurance. Whole life has the advantage of offering accumulating cash value, but is often too expensive for young families to afford. You may want to consider a small amount of whole life to begin with, or chose a term policy that offers a conversion to whole life option when you are ready, and likely more able to afford the higher premiums.
Term life insurance is the lowest cost option and is great for protecting a need for a specific period of time, such as when your children are young, and/or while paying off a mortgage. A combination of both term and whole life is also an option.
Another important thing to remember is to update your beneficiaries on your current life insurance policies to include your children as beneficiaries, especially in the event of a divorce. You may want to consider naming a trustee for your children in the event both parents die before the children turn 18.
A last consideration is purchasing life insurance on newborn and young children. While there is not likely a financial need for the child to be insured, many people consider buying because their insurability is high and the premium costs are low. If health issues develop with the child later on, they may not be eligible for life insurance coverage. AAFMAA's Value-Added Whole Life and Generations Plus policies are worth a look.