When you become a parent, you want nothing more than to protect your children from harm. Unfortunately, you can’t anticipate every obstacle your children will encounter, including the possibility of your death. By having an appropriate life insurance policy, you can help ensure that your children have a financial safety net should something happen to you.
Benefits of Life Insurance for Parents
Purchasing the right amount of life insurance coverage can give your children resources that they will need to help maintain their quality of life after your death. A life insurance payout can also help your child pay for medical care, attend college without going into debt and pursue his or her future dreams and goals.
Although some parents assume that an employer-sponsored life insurance policy is sufficient to take care of their families, these policies are usually too small to cover all of the expenses your loved ones would face if you died. To ensure that your family is fully protected, find out exactly how much money your family would need to survive without you, and make sure that you have enough life insurance coverage to provide them with at least that amount.
Kinds of Life Insurance
The basic kinds of life insurance are whole life insurance and term life insurance. Whole life insurance can cover your entire lifetime, while term life insurance lasts only for a specified period of time. Although term life insurance policies tend to be less expensive than whole life insurance policies, they don’t accumulate cash value, and you will forfeit any premiums you paid if you don’t die before the policy’s term expires. Whole life insurance policies are more expensive, but build cash value as you continue to pay your premiums.
Gerber Life’s Whole Life Insurance Policy1, for example, builds cash value,” as long as your premiums are paid. This enables you or your loved ones to have an immediate source of cash to borrow against* if an emergency arises. Gerber Life also offers a Term Life Insurance Policy2. For both of these policies, the insurance premiums never increase throughout the duration of your policy. For the Gerber Life Term Life Insurance Policy, you have the option to choose a policy term of 10, 15, 20 or 30 years, whichever works best for you.
Calculating Your Coverage Amounts
As a parent, choosing the appropriate amount of life insurance coverage is crucial, regardless of whether you purchase a term or whole life policy. When determining how much life insurance you need to buy, calculate the expenses your spouse and/or children would need after paying your debts, such as your mortgage, car loan, funeral bills and medical costs. Next, add enough money to replace your lost income at least until your children are grown. Depending on your situation, you may also want to include additional funds that your children can use to attend college in the future.
Optional Riders for Insurance Policies
In addition to a basic life insurance policy, parents should also consider optional coverages, called “riders” such as:
- Return of premium rider: an addendum to a term policy that allows you to get all of your money back if you live past the end of the term.
- Accidental death rider: additional coverage that pays an additional amount if your death results from a covered accident.
- Critical illness rider: an addendum that requires the policy to pay a lump sum if you are diagnosed with a critical illness, such as cancer.
- Term conversion rider: a rider that allows you to convert a term life policy to a whole life policy without a medical exam.
- Disability income rider: additional coverage that allows you to collect regular payments from the policy if you are unable to work because of a disability.
Life insurance can play an important role, especially if you contribute income to the household.
1 Policy Form Series SWLP-13;
Policy Form ICC13-SWLP;
Policy Form Series HWLP-13;
2 Policy Form Series SLT-05;
Policy Form Series LTL-11;
Policy Form ICC11-LTL
*Policy loan interest rate is 8%