The importance of Life Insurance for Parents of Minors
Senior Research Analyst
Life insurance is a topic that most people don’t want to think about or discuss for obvious reasons. However if you’re an adult who is raising children, we strongly encourage you to get the necessary coverage to financially protect your family if something happens to you. When it’s done right, life insurance is the tool that secures financial resources for your family no matter what. Getting set up is simple and most of the time it can provide a lot of protection without much cost. Let’s walk through the basics you need to know:
Choosing the best type of life insurance for your family
There are a number of different choices when it comes to deciding what type of policy to buy. We’ll stick to the two main life insurance policies, term and permanent.
Term Life Insurance
This is the simplest, most straightforward policy. You can buy this coverage for a fixed period of time, usually 10-30 years. Once the period is over, the insurance will end. Most people who purchase this insurance are looking to cover expenses such as repayment of debt, raising children and income replacement. The biggest benefit to this insurance is the cost. It is the most affordable coverage and is great for families on a tight budget.
Permanent Life Insurance
As the name implies, permanent life insurance provides coverage that is meant to last a lifetime or put another way, the need that you are insuring does not have a set time limit. There are several different types of permanent insurance products including whole life, universal life and variable life. In general these products provide a death benefit and also have the potential to build cash value which could be used for other things in the future such as supplementing retirement income. The downside is that the premiums are much higher and oftentimes cost 10x more than term insurance. But in some cases permanent insurance makes sense. As with most things you need to take a number of factors into account as everyone’s situation is different.
Why both parents should have coverage
People tend to only think they need coverage for the working spouse of the family. However if one parent is a stay-at-home parent that doesn’t bring in earned income, the things they do every day would cost money to replace. Some of those expenses would include childcare, house work and grocery shopping. In addition life insurance would help the working spouse with the adjustment period, time off from work and debt coverage such as a mortgage. The money from the life insurance would assist the family to make adjustments needed to move forward.
The main reason for life insurance is to provide the people you love with the means to live with the same standard of life without you being there. It is important to make sure you name someone to receive the money from your policy. This could be a spouse or a guardian who would take care of your children. We don’t recommend naming a minor as a beneficiary because life insurance companies won’t pay the proceeds directly to minors.
If you’d like a quote for life insurance coverage or have any questions, contact Sgroi Financial today. If you already have life insurance, we offer a complimentary policy review to make sure your current policy is performing as expected. Also for more information on life insurance, listen to my interview with Clay Moden on 106.5FM WYRK.
WEEKLY SEGMENT ON WYRK
You can catch our weekly Plan.Protect.Invest. segment live on WYRK 106.5FM at 7:20am every Wednesday. Each week we will have a Sgroi Financial planner on with Clay Moden and the WYRK morning show to discuss financial topics to educate and help their listeners.
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