Life insurance can be one of the most important investments you can make when deciding to grow your family because it can offer them significant financial protection. If you pass away, your family receives a substantial payout called a death benefit useful for replacing your income, paying off debts, and saving for the future.
But there are plenty of policy types out there and each type can fit different families and circumstances. To help you choose, here are several types of life insurance to consider if you have a growing family.
Read more: Nature and Scope of Life Insurance
1. Term Life Insurance
Term life insurance offers a fixed term length of 10 to 30 years, based on your choice. You can outlive the policy, meaning you’ll have to renew your coverage or get a new policy at expiration to continue coverage.
However, term life insurance offers lower premiums for a larger amount of coverage. LIMRA’s 2022 Life Insurance Barometer study found that a 20-year, $250,000 term life insurance policy for healthy 30-year-olds costs only $170 per year on average. Such low premiums can make term life insurance policies easy for growing families to afford. You won’t have to budget a lot for the policy, providing you with more money to use on family expenses.
2. Whole Life Insurance
Some parents may prefer to lock in life insurance coverage for a lifetime. This gives them the peace of mind that no matter how long they live, their partner and children will be financially secure. That’s where whole life insurance can be incredibly helpful. This family life insurance policy costs more than term life insurance, but coverage lasts for life as long as you keep up on premiums.
Furthermore, whole life insurance comes with a cash value growth component – perfect for building wealth that can benefit your growing family in the future. A portion of each premium you pay goes into this component, growing tax-deferred at a fixed, guaranteed rate.
Once your cash value grows enough, you can borrow from it at low rates and favorable terms or withdraw from it. As a result, you can potentially gain access to a substantial source of funds to help repay higher-interest debts, fund your children’s college, and more. Plus, if you ever find that you don’t need your policy anymore and surrender it, you can receive your full cash value minus surrender charges.
3. Final Expense Insurance
In some families, both parents work and earn substantial incomes while maintaining minimal lifestyle expenses. They may not need as large a death benefit to replace income or pay off debts – instead, they might only need to help their partner cover end-of-life costs, like funeral expenses and medical bills.
A final expense insurance policy can work well in this case. This is a small permanent life policy that has a low death benefit but cheap premiums, lifelong coverage, and cash value. This helps families cut their costs on lifelong coverage if they don’t need as large of a death benefit.
The bottom line
Once you begin having children and growing your family, protecting them in case the worst happens becomes paramount. The right life insurance policy can help. Term life insurance may work well for families with simpler financial pictures looking to maximize coverage for their dollar if they’re willing to risk outliving the policy.
On the other hand, whole-life insurance may work better for families wanting the peace of mind of lifelong coverage and the wealth-building potential available through the cash value component. And final expense insurance can be a good choice for families who don’t need as much financial protection but need it for life. It typically only covers end-of-life expenses, making it work for families where both parents earn enough to be largely financially independent.
Regardless of the policy type you choose, you can cut costs further by gathering quotes from multiple insurers. Shopping around like this helps you compare quotes and find the lowest rates on the coverage you need.