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Life Insurance For New Parents | Ultimate Guide

October 3 2019 5 min read Life Insurance

 

life insurance for new parents

Do you remember the first time you drove in the dark?

Were you scared?

I was.

I was terrified.

And lost.

Maybe terrified because I was lost.

And I couldn’t figure out how to use the headlights.

So I was terrified, and lost, and couldn’t use the headlights.

 

Not really a good combination for my first time driving in the dark.

But what’s this got to do with life insurance for new parents I hear you ask?

I was terrified, not because of the driving, but because my first born was due to arrive imminently. And the way things were going, I wasn’t going to make it to the birth.

17th September 2010

Hannah was still in labour, she had been induced three times but no sign of baba. “Nothing stirring” as the nurses put it, so the hospital advised me to head off home. Home was Tullamore, this was Mullingar so I had booked into the Mullingar Park Hotel which was only a couple of minutes drive (yeah right) from the hospital.

Back to the car and off I went on the 2-minute journey to the hotel. A route I thought I knew quite well. But things look a lot different in the dark, especially things like roundabouts.

I don’t know if you know Mullingar but that night, there were roundabouts everywhere. Pretty soon I was lost, heading out-of-town and down a backroad, I had never seen before. In fact, it was the darkest road I had ever seen. Like pitch black dark. Why so dark?

Beeeeeeeeeeeeeeeeep, HONNNNNNNNNNK.

Oh hi there friendly folk beeping and waving at me. Hang on a minute, this is rural Ireland, there’s no road friendliness here, only rage.

Oh sweet Jesus, I’ve been driving for 10 minutes without any lights on.

OK LIGHTS ON, PHEW.

More flashing and beeping. More rage.

Oh shite, I have full beams on, how do I turn them off?

I pulled into an old disused petrol station and tried to calm down. My hands were trembling a bit due to fear, strong hospital coffee and lack of sleep. Luckily gallows humour set in as I thought wouldn’t it be bloody typical if I didn’t make it to the birth. That sort of made me chuckle and relax.

I eventually made it back to the hotel and was there when Chloe was born the next morning.

Holding her for the first time made me think about how her life would have panned out if I hadn’t made it to the hospital. You see I didn’t have any life cover – I was young, no kids, both myself and my wife were financially independent so I had no need.

Maybe you’re in the same boat?

If you are, you’ve come to the right place, here’s what you need to know about life insurance for new parents.

 

Life insurance for new parents

What does life insurance do?

It’s a bit like Batman – A silent guardian, a watchful protector. A dark knight.

In plain English, it creates an immediate source of income for your family when you die.

When you die, your income stops but your family will still depend on that income. Life insurance leaves a lump sum of money that your family can dip into to replace your income.

How much life insurance do you need?

A lot of people ask what’s the average amount of life insurance people buy. I can’t answer this question as it all depends on your personal circumstances. But I can tell you the average amount people spend protecting their family is 2.8% of their gross monthly income.

So the average person who earns €50k spends €116 per month. A couple earning €80k spend €186 per month on protecting their family.

The more you earn, the more potential income your family will lose when you die.

How much life insurance is enough life insurance?

Do both parents need life insurance?

A stay at home parent should earn around €60,000 per year for all the work they do, be it

  • taxi driver
  • counsellor
  • chef
  • cleaner
  • gardener

and a million other things.

If they were no longer here to do all of the above, what would happen?

Would their partner have to give up work and stay at home to mind the kids?

Could they afford to keep working and pay for a childminder?

That why SAHPs need life assurance.

God forbid the worst happens, the policy will leave a lump sum to lessen financial stress at a time of great emotional distress.

What about single parents?

This blog looks at things from the perspective of a single mother but the advice goes for single dads too.

How much does life insurance for new parents cost?

Again, it’s one of the great unanswerables. The cost of life insurance depends on a number of factors:

  • Age
  • Health
  • Smoker/non
  • Amount
  • Term (years)

Take a minute and get a quick life insurance quote here.

What’s the difference between life insurance and mortgage protection?

Life insurance leaves money to take care of your family. It protects your family.

Mortgage protection leaves money to clear your debt to the bank. It protects the bank.

It couldn’t be simpler. If you have a mortgage and children, you need mortgage protection and life insurance.

Should new parents buy serious illness cover?

Serious/critical/specified illness cover is important but I wouldn’t go blowing the budget on it. Usually, I recommend you put enough serious illness cover in place to allow you to take one year off work to focus on getting better.

You see serious illness cover, as its name suggests, only covers serious illnesses. If you make a successful serious illness cover claim, more than likely you won’t be able to work for a while. Your serious illness payout of one year’s salary means you can take a year off without worrying about money.

You buy serious illness cover on a life insurance policy – now take 2 minutes and get a quick serious illness quote.

But what if you’re out of work long-term due to illness?

This is why you need income protection too.

How does income protection differ from serious illness cover?

Here’s a link to an article on this very subject.

This is the main difference:

  • Critical illness insurance pays out a one-time lump sum if you’re diagnosed with an illness as defined by your policy.
  • Income protection insurance pays you a regular income if you’re too ill to work due to any illness until you get back to work.

Does income protection cost a lot more than serious illness cover?

Your occupation has the biggest influence on how much your income protection will cost. The more risk you have of injury in your job, the higher the cost.

e.g income protection for accountants will cost less than income protection for builders.

We’ve compared income protection calculators in a previous article – go check it out.

Another important factor in the price of income protection is the deferred period you choose. This is the continuous period of time you must be out of work before you can claim. You can choose a deferred period of 4, 8, 13, 26 or 52 weeks. The shorter the deferred period, the higher your premium. Most people choose the deferred period that coincides with the end of their sick pay from work.

To help you decide, here’s an article I wrote on sick pay in Ireland.

Did you know your employer doesn’t have to offer you any?

The tight bas…

 

For how long do I need life insurance as a new parent?

I recommend buying a policy until your youngest is 25. At 25, they should have finished full-time education so, hopefully, won’t have to leech off you for much longer. At that stage, you can review and reduce your life insurance if needs be.

Always add a conversion option to your policy. This will allow you to extend/add years to your policy in the future without answering medical questions.

Over to you…

They’re the basics of life insurance for new parents.

Actually they’re the basics for all parents who don’t yet have life insurance.

For some strange reason, I find that people don’t put life insurance in place until child number two pops out. Maybe you’re here because you’ve just had your second child, third??

There’s quite a bit there so I expect you’ll have questions. I’m here to answer them no matter how small, silly or insignificant you think they are, I’m all ears.

If you’d like me to make a recommendation for you based on where you are in life, please complete this questionnaire.

Chat soon.

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