Parent time, Tips

The Life Insurance guide for new parents

When you become a parent, you will probably look at life and financial matters in a different way. You are now responsible for another life, and planning for the future is essential. If the worst happens to you or your partner, your child will need to be looked after financially and emotionally. The best way to ensure that all these things are taken care of is by having the right life insurance policy.

Getting the right life insurance

If you have a mortgage, you will already have life insurance. Term insurance is limited to the time for which the insurance is required – for example, during the term of an interest-only mortgage where the lump sum you owe stays the same throughout. If something happens to you, the mortgage is paid. Decreasing term insurance pays out the amount required on a repayment mortgage; because the amount owed on a repayment mortgage decreases over the term, the premium on this type of policy is cheaper. Life insurance provides cover for the whole of the policyholder’s life and is therefore more expensive – a lump sum will be paid out at some point.

When you start a family, you might want to reconsider your mortgage policy or change the policyholder. This is because if something happens to one of you, you might decide the other one should be at home to look after your child, or you might need to pay for childcare. A joint life policy, or two separate policies, maybe more important when you start a family. If you want to change the policyholder or beneficiary on your life insurance, contact your life insurance company for a quote and they will send you the necessary forms and the information you need.

Difficulties with life insurance

If you want to get a quote from another provider, you can do this online by inputting your details, or by telephone, or visit the provider in person if you prefer. Do not cancel a policy until you have a new one in place. You may encounter problems with life insurance if you have a pre-existing medical condition, or your premium may be higher if you smoke or have a bad credit score.

Reducing your life insurance premiums

The amount of life insurance should generally be ten times the highest earner’s income, enough to pay off the mortgage and outstanding loans, provide your family with a reasonable level of income and pay for things such as childcare. If you are concerned about the premiums, you may be able to reduce them. You could check what benefits your employer offers for death in service and deduct that amount from the amount of life insurance you need. This also applies to any life insurance you have attached to savings or investment plans – you could deduct the amount from the amount of life cover required, thereby reducing your premiums.

Planning for the future

Shop around for the best deal on life insurance for you and your family and get life insurance quotes from at least two brokers. Take a few minutes to get your finances in order and you can get on with the very important task of enjoying your new family.

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