Life insurance is not only important for people. It is a tool to keep your whole family stable in case of death in the family. Creating a life insurance plan for the whole family, including children, helps claim every dollar of premiums.
We have the details on how life and children life insurance works and how to make it work for you. When you're ready to shop, our independent expert insurance agents are here to answer questions and help you compare quotes to get the most out of your budget.
Why is life insurance important for your family?
Life insurance does not solve the pain and pain of losing a loved one, but it can give you the time and comfort you need to cry in peace. Life insurance money is there to cover things like:
Travel and accommodation costs
Or even a memorable family vacation
Life insurance is especially important for replacing lost income and paying off debts. Taking out extra life insurance for a partner or spouse with a higher income helps protect the other half of the couple. For a single parent, taking out life insurance is even more important to protect their children's financial future.
Life insurance also ensures that your family can honor your cremation or burial wishes. The funeral costs increased by nearly 1,000% between 1960 and 2006 and are only increasing:
In 2017, the median cost of an adult funeral with observation and cremation was $ 6,260.
The cost of a vision and burial was even higher, at $ 8,755 with a vault and $ 7,360 without a vault.
Considering that over three quarters of Americans who earn less than $ 100,000 a year have less than $ 5,000 in their savings account, it's easy to see how insurance makes planning a funeral significantly less difficult and painful.
The right type of life insurance for your family will depend on your income, debts, funeral wishes and the age of any children or other dependents. The only type of life insurance that is wrong is life insurance.
How does children's life insurance work?
Many insurance companies offer life insurance programs designed specifically for children. When you buy life insurance for a child, lost income and debt payments are not a problem. Instead, children's life insurance is designed to cover funeral expenses and expenses related to the death of a child.
Life insurance for children is very cheap, usually from $ 20 to $ 30 per year (or even less). It can usually be purchased as soon as a child is one year old and sometimes even earlier.
The sooner you buy life insurance for your child, the cheaper and more effective it will be. If your child gets sick or is seriously injured, they are unlikely to get life insurance, so buying life insurance while they are very young helps ensure coverage.
Common cuts for children's life insurance policies are $ 10,000, $ 15,000 and $ 25,000.
When buying a children's life insurance, think about what would make the tragedy easier for your family. Free time from work is an option. Life insurance can help you get more free time after your free time or mourning leave has expired.
Some families may also want to take a vacation or perform another commemorative activity to help survive family bonding and healing. Life insurance can help pay for it.
Another advantage of children's life insurance is that it can be continued into adulthood, saving money and time for children when they are ready to manage their own coverage. If young people choose to continue their life insurance, they often get discounted coverage and can potentially skip the medical exam.
Some insurance policies for children can also be converted into a flat-rate savings account when the child turns 18. This can be used to help pay for college or other large expenses.
Should you choose life insurance or full life insurance?
It depends on what you want life insurance to cover. Many families would benefit from having both life and life insurance policies. First, let's analyze the most common types of life insurance products:
Duration: lasts a "term", such as 10, 20 or 30 years. You will pay the same premiums for the term, with the option to renew the policy (at higher rates based on your age and health) at the end of the period.
Useful for: covering debts or providing for children. Purchase a 30-year policy to cover a mortgage when buying a home or a 25-year policy when you have a child, to make sure they are cared for through college.
All life: it lasts as long as you continue to pay premiums, which remain the same forever. This is the cheapest type of life insurance as long as you buy it while you are relatively young and healthy.
Useful for: covering funeral expenses and other "fundamental" expenses, since it is usually purchased in lower quantities than for life. It is also useful for retirement planning, as it gains value over time. In the end you can cash it out when you no longer want life insurance.
Universal life: like all life, except for the fact that it is also an investment vehicle. The rewards are invested and used to increase the value of the policy. You can also add additional money as an investment, as universal life insurance policies usually offer guaranteed returns.
Useful for: everything life insurance can do, plus the benefits of a low risk investment. This type of policy is particularly easy to cancel in retirement. (Look down.)
Annuities: not technically a life insurance, but a closely related service. Annuities slowly pay a lump sum over months or years. The process of transforming the lump sum into annuity payments is called annuitization.
Useful for: replacement income. Instead of paying a lump sum to the family, it is possible to distribute a smaller amount (e.g. $ 2,000) to be used for living expenses, for example. In retirement, you can benefit from the annuity yourself by collecting an entire or universal policy and converting it into monthly income.
Life insurance provided by the employer: can be offered as part of the package of benefits together with health insurance, disability insurance and similar insurance products. It may be a useful option, but it is rarely as versatile or inexpensive as the policies you purchase yourself.
Some families may choose a combination of two or more of these options, while others will do well with one.
How to develop a family life insurance plan
Start by writing a list of all the expenses currently covered by your income. If you have a spouse or partner, ask them to write their list too. Don't forget to include:
Accommodation costs (rent or mortgage)
Vehicle costs (gas, repairs, leasing or car payment)
Debts (student loans, credit cards, medicine)
Living expenses such as food and clothes
Lessons for private school or college, if one of the two scenarios applies
Costs of extracurricular activities (sports, music programs, summer camps)
Medical expenses, assisted living and other care for the elderly or disabled
Fun expenses like annual holidays
Next, write a list of the expenses you expect in the coming years: do children go to college? A dream house or a holiday home? An elderly parent who needs treatment? Estimate those costs in the best possible way.
Finally, write down a list of expenses that may arise if you or any other family member, including a child, dies. This includes:
Burial or cremation fees
Travel and accommodation expenses related to a funeral or funeral service
Special charitable donations you would like to make after death
Money to grant additional free time from work or to allow a home parent to continue staying at home
Money for fun or meaningful things that would help you and your family through pain
Once you have an idea of how much all these things might cost, it's time to think about short term expenses versus long term or permanent expenses.
Short-term expenses are generally better covered by life insurance.
Long-term or permanent expenses, such as burial or cremation expenses, are generally better covered by life insurance.
An independent insurance agent can answer questions and help you find the right coverage combination for you.
All of this information makes up your family's insurance plan. Keep updating it every time you have a big life change. With it, you will always have the peace of mind that comes from knowing that your family will have the resources to survive a tragedy.
What about the life insurance provided by the employer?
Many employers offer life insurance as part of the benefits package. You may get it for free or you may need to add some of your money. These life insurance policies have their advantages, but it is almost always better to shop for additional life insurance on your own. You may also want to completely skip the coverage provided by the employer.
This is because these policies are often more expensive than their non-working counterparts. It boils down to aggregate risk: when you buy a life insurance provided by the employer, you usually pay for the risks of all employees in the workplace, not just for your risks.
This works in your favor if you are older (especially if you are over 40) or have pre-existing health problems, since these things can significantly increase the cost of individual life insurance. But if you are young and healthy, it will cost you more.
The life insurance provided by the employer generally only lasts as long as you are employed. This is a problem because the price of life insurance increases rapidly with age.
If you choose the option provided by your employer between the ages of 20 and 30 and move to a new company between the ages of 30 and 40, you will not be able to continue your cheaper coverage. You will have to pay a higher rate based on your current age, when you probably could have blocked a cheaper permanent rate if you had purchased life insurance yourself.
Some life insurance policies provided by the employer allow you to transfer ownership of the life insurance policy to yourself when you change employers, but usually charge a high fee for doing so. Their premiums tend to be higher and the amount of benefit less than the coverage you can purchase from an independent insurance agent.
The policies provided by employers can offer excellent additional coverage, especially when you are 40 years old or older, when normal life insurance can become prohibitive. But it's almost always a bad idea to put all the eggs in that basket.
How to buy life insurance for children and families
You can start by talking to an independent insurance agent. Independent agents work for you, not for insurance companies. They can find the right price for you, not just the best price a company offers. If you get stuck while putting your family's life insurance plan together, they can answer questions and help you prioritize.
An independent insurance agent can help you purchase life insurance for every member of your family, including your children. Sometimes children's life insurance is purchased by extended family members, such as grandparents. If so, your independent insurance agent can help you integrate this generous gift into the rest of your life insurance plan.
Life insurance often requires a medical examination. Be honest as you prepare for and during the exam: a deliberate lie or omission can invalidate your life insurance policy. If you are confused about any requirements, your independent insurance agent can help you get over it. They provide the personal touch in a situation that can be stressful and disturbing.
An independent insurance agent rounds the quotes of several insurance companies to compare. Don't automatically choose the cheapest option. Instead, ask your agent what life insurance discounts have been applied and how much coverage each option offers.
Finally, one of the most important benefits of an independent life insurance agent occurs after the tragedy strikes. Your agent can act as an intermediary for you and the insurance company.
They will help you and your loved ones get the benefit of life insurance as quickly and easily as possible, so that you can focus on mourning instead of customer service.
Buying a life insurance is difficult. Navigating it alone makes it harder. We wish you and your family the best. And remember, the only wrong way to manage your life insurance is to not think about it until it's too late. You're here, so you're doing something right!