A Brief Guide to Insurance for Parents

You're a parent now; here is a guide to insurance for you. Your little one is so cute and cuddly, yet very expensive and dependable on you and your financial decisions. There are many of such decisions to discuss but the scope of this article is limited to just one of them, insurance for yourself and your child. According to Lynn Ballou in an article on MoneyCentral.msn.com Skimping on Insurance is one of the top 10 mistakes made by parents. According to the same article anyone with a child should have $500,000 coverage as a bare bone minimum. Certainly if you have more children this number doubles if not triples. Group policies (work insurance) are generally not any cheaper than an individual policy. Group or work policies are not transferable so if you lose your job it will be more costly to get insurance. If you lose your job and are having health problems it will be extremely expensive. So all parents out there get individual insurance policy for at least $500,000 or 5 times your earnings, the total household debt, the cost of a babysitter if your stay at home spouse would die. You should get term life insurance which is life insurance for a set amount of time.

According to Peg Downey it is usually recommended that parents get term life insurance. It is the simplest and cheapest type of insurance and covers a majority of the people's needs. According to John Ryan a 30 year old healthy male could have recently got a $500,000 term policy from First Penn Pacific Company for only $475 a year. Make sure the term lasts until your children are out of college and will no longer be dependent on you. Make sure you get a policy that has the option to convert to a whole life or variable life policy. This makes it cheaper if you decide you want lifelong coverage at a later date.

Another often over looked type of insurance coverage for parents is disability insurance. It is more likely you are injured and become disabled while working than dyeing. Generally employer's plans pay you 60% of your income if you become disabled. If you make at least $100,000 this might be enough. If you make substantially more then you may want a supplemental plan. This area is really dependant on your family's lifestyle and how much you actually need to maintain that lifestyle. According to Ryan generally every $1000 dollars a month of supplemental coverage costs a male $370 a year and a female $540 a year. Prices dramatically vary between companies so defiantly shop around. Can you say AFLAC?

Something to watch out for is a company trying to sell you insurance on your baby. Leave immediately if they offer this to you. This is a rip-off and not necessary. It is only beneficial and therefore necessary to have insurance on someone whose death would be detrimental financially to your family.

Sources:

Personal experience.

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