Welcoming a newborn can elicit joy and anxiety. For new mums, worrying about your baby’s future and their wellbeing in the event of your absence can be stressful. This is why every new mum needs to think about a life insurance plan.
Life insurance for mums gives you the much-needed peace of mind allowing you to focus on what your baby needs more: love and care. Amidst the additional expenses brought about by the baby, a life insurance policy should be at the top of the priority list.
In this article, we take a look at 7 facts every new mum should know about having this cover.
What Is Life Insurance?
Put simply, life insurance is an agreement between you and an insurance company that guarantees a monetary payout to your beneficiaries in the event of your death or permanent incapacitation. Ideally, life insurance replaces your income when you pass on or get rendered unable to provide for your family ensuring your family’s lifestyle is maintained.
Life insurance falls under two main categories: term life insurance and Whole of Life insurance. As the name states, term life insurance is active for a predetermined period. Beneficiaries to the policyholder do not receive a payout upon the expiry of the agreed period.
On the other hand, Whole of Life or permanent life insurance as is commonly known, guarantees a payout to the beneficiaries of the policyholder irrespective of when risk occurs.
Is My Employer’s Life Insurance Policy Enough?
If you are employed, you most probably have a life insurance policy paid for by your employer – which begs the question, why get another one?
A life insurance policy provided by your employer does not offer a personalized cover and in most instances, the benefits realized upon your demise may not be enough to cushion your family. Furthermore, the coverage is limited to your term of employment.
As such, new mums need to consider taking out a personalized life insurance policy that will cover them and their families even when they change or lose their current jobs.
How Much Life Insurance is enough?
One of the hardest things about getting life insurance is estimating how much life insurance one needs. It is even harder for new mums as they have to factor in family growth. One way of getting to a nice number is by estimating your family’s monthly expenses and using that estimate as a guide to how much you would want your policy to payout.
The benefits from a life insurance policy are meant to cover the income you would have contributed if you were still alive. Base the worth of your life insurance on your income while keeping in mind other factors such as inflation and your kids’ education.
Pricing Life Insurance
Having some knowledge on what drives the price of life insurance can help new mums save some cash and get ideal policies. First, several market forces outside one’s control determine the price of a life insurance policy. They include demand, type of policy, length of coverage (fixed-term or permanent), and amount of coverage envisioned.
However, there are certain factors within the individual’s control that may help lower the price of a life insurance policy. They include age, health, gender, smoking habits, and hobbies (people with dangerous hobbies such as sky diving are likely to pay more).
When to Buy a Life Insurance
The average age of a first-time mum is around 30 years. Since young people are not affected by health issues as much, experts recommend the early 20s as the best age to buy a life insurance policy as the premiums tend to be lower. Still, most 30 years olds fall under the recommended age group for getting a life insurance policy.
Ideally, one should have a policy even before they have children. However, there is no cause for alarm if you do not have life insurance yet as it is never too late to get one. As a new mum, you can get a life insurance policy as soon as your child is born or once you get a break from the all hassle that comes with taking care of an infant.
Term Life Insurance or Whole of Life Insurance?
Deciding which type of policy to get is dependent on several factors: a persons’ income, the type of coverage envisioned, and terms of the policy. A term life insurance is cheaper and ideal for parents looking to cover their children until they get to an age of self-dependence. The only downside to it is that your children will not receive any benefits should anything happen to you outside of the coverage period.
Whole of Life on the other hand is expensive but covers the holder for their entire life. As a mum, you can rest assured your kids will be taken care of if something happens to you. The biggest downside is that you risk losing insurance in case you default on making scheduled premiums.
Any new mum will automatically fall for the urge to list her child as the main beneficiary in the insurance policy. This is not advisable as insurance companies do not pay out to minors unless a guardian is appointed by a court of law.
This is why it’s recommended that you list your spouse as your main beneficiary or set up a life insurance trust if you are a single parent. You can then appoint a trustee to run the trust according to your instructions. As such, your kids will receive the insurance benefits even if they are still underage.
Being a new mum can be quite demanding. Dealing with additional expenses, care of the newborn, while at the same time worrying about their future is a lot to deal with.
As a new mum, you can have one less thing to worry about by purchasing a life insurance policy to cover your newborn should anything happen to you. Plan for it early enough and try not to focus so much on the premiums to be paid. At the end of the day, you are safeguarding your loved ones’ life.