Three Often-Overlooked, but Critical Issues in Financial Planning for a Baby

If you are looking forward to welcoming your first child, you may have already reviewed your health insurance policy to be sure you have adequate coverage for the birth and the baby, budgeted for future child care expenses, and begun to purchase the surprising array of products and equipment that your new baby will require. However, financial planning for a baby should go beyond these basics. In particular, when planning financially for a baby, don't forget these three often-overlooked issues: life insurance, disability insurance and preparing a will. They could be critical to your new baby's future.

Life Insurance. For many working couples without dependents, life insurance is low on the list of financial priorities and may even be unnecessary. However, when you are anticipating the arrival of a new baby, this should change. If something were to happen to one or both of you, the proceeds from a life insurance policy could make an enormous difference in your baby's future.

You may already have life insurance through your employer. However, employer-provided life insurance often is limited and may be inadequate once you add a child to your family. Possibly, you can purchase additional coverage at relatively low cost through your employer, so start by checking out your options there. Beyond that, purchasing a term life insurance policy is one of the most straightforward ways to obtain a substantial amount of coverage, and it can be surprisingly economical.

Disability Insurance. Disability insurance is one of the most overlooked and least understood personal insurance products and, yet, for many people it is one of the most important to have. Disability insurance will replace a portion of your income if you are unable to work for an extended period of time as a result of injury or illness.

You may have some disability insurance through your employer. If so, check out how much coverage is provided and whether it would be adequate if you became seriously ill and couldn't work for months or more. If not or if disability insurance is not a benefit provided by your employer, investigate individual coverage.

A Will. As a young couple just starting out, you may not have substantial assets. As a result, you and your spouse may have felt that wills were unnecessary. That is no longer true once you know you are going to become parents, because a will serves another critical purpose beyond the dispersion of assets: it is a way for you to name a guardian for your child. Making this important decision ahead of time will allow you to rest easy knowing that your child will be well cared for by the person of your choice no matter what happens to you.

Source:

Karen Hube, articles.moneycentral.msn.com, New parents' top 10 money mistakes '" MSN Money

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