If you have children, do your life insurance needs change? Normally, the answer is yes.
If you have children who are financially dependent on you now or who will be in the future, a life insurance policy can provide security and peace of mind.
Do All Parents Need Life Insurance?
It doesn’t matter whether you are a single parent, a stay at home parent, a divorced parent or happily married with kids, life insurance can help you to provide for your children in the event that you pass away. While life insurance payouts are typically used as an income replacement, there’s plenty of ways for your beneficiaries to utilise the fruits of your life insurance policy. This could include paying for tuition fees, covering child support payments if you’re divorced, making provision for expenses such as drivers or childcare, being used as a deposit on a house for your child in future, medical bills or any other expense you can think of.
In fact, you can even stipulate in your Will and Testament how you’d like your life insurance to be used. For instance, you can make provision for your children’s education by insisting that a portion of their payout is spent on University.
What If You’re Not The Breadwinner?
It’s quite obvious that breadwinners need life insurance. Essentially, if you’re the main financial earner and don’t have enough savings for your dependents to maintain their lifestyle if you passed away tomorrow, a life insurance policy is a good idea. If you’re a single parent, this is even more true.
However, what about those parents who aren’t breadwinners? It might seem surprising, but you probably need life insurance too. Your life insurance can act as income replacement if you do work, meaning that your surviving spouse isn’t left financially suffering as a result of your passing. Even if you don’t earn any income, you likely contribute to the household in other ways. This could be by cooking, looking after the children, budgeting for the household and taking care of admin. If you passed away, would your family need to employ other services to help them manage day to day life? For instance, a housekeeper, au pair, driver, or admin person? If so, then life insurance can help make provision for those costs.
How Much Cover Do I Need?
If you already had life insurance in place, your needs will probably have changed if you now have a child or children. If you didn’t have it in place, now is a good time to assess how much cover you need to adequately provide for your family.
When calculating your life insurance needs you have to consider your costs in the short and long term future. With kids this includes school and university fees, daily living costs until they reach adulthood, extra expenses such as cars, birthdays, medical or car insurance and so on. Finding an exact figure is hard. As a rough guide, many people work from ten times their yearly salary. Naturally, this can go up or down depending on your individual needs such as individual needs, the number of your dependents, your lifestyle and associated costs of living, the number of dependents that you’ll need to take care of and similar factors.