Adding baby to life insurance

Having a baby is one of the most important triggers to review, update, or obtain life insurance coverage. New parents need to ensure they have adequate coverage to protect their child financially if something happens to one or both parents.

15 steps across 2 sections

1. Steps Guide

  • Assess your current coverage — Review existing life insurance policies to determine if the death benefit is sufficient now that you have a dependent. Financial advisors commonly recommend coverage ...
  • Increase coverage if needed — If your current policy is insufficient, apply for additional coverage. Options include:
  • Increasing the death benefit on your existing term policy (may require a new medical exam)
  • Purchasing a supplemental term life policy
  • Adding coverage through your employer's group plan (often allows increased coverage during a qualifying life event)
  • Update beneficiary designations — Review and update the primary and contingent beneficiaries on all life insurance policies:
  • Primary beneficiary Typically your spouse/partner
  • Contingent beneficiary Your child(ren) — but see the trust note below
  • Consider a trust for minor beneficiaries — Do NOT name a minor child as a direct beneficiary. Minors cannot legally receive death benefits. Instead:
  • Create a trust and name the trust as the contingent beneficiary

2. Key Details

  • Timing Apply for or increase coverage during pregnancy if possible. Post-birth medical complications can increase premiums.
  • Employer coverage Many employers allow coverage increases during qualifying life events (birth of a child) without medical underwriting.
  • Child rider vs. standalone policy A rider is cheaper but has lower coverage limits. A standalone whole life policy builds cash value but costs more.
  • Term vs. whole life for parents Term life (20-30 year term) is the most cost-effective option for most new parents. Whole life is significantly more expensive.
  • Both parents need coverage Even if one parent does not work, replacing their childcare and household contributions is expensive.

Common Mistakes

  • Naming a minor child as a direct beneficiary
  • Not increasing coverage after having a baby
  • Only insuring the higher-earning parent
  • Waiting too long to apply
  • Forgetting to update beneficiaries

Pro Tips

  • Use the birth of your child as a trigger to do a full financial review — life...
  • Compare quotes from multiple insurers
  • If you are healthy and non-smoking, term life insurance for new parents is ve...
  • Consider a 20-30 year term length that covers the period until your child is ...
  • Review your employer's group life insurance enrollment window — qualifying li...

Sources

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