As a dad, you have many responsibilities. Protecting your little ones in every way possible is a top priority.
You won’t be around to protect them forever. But you can plan ahead to ensure if anything happens to you, your family will still be okay.
Life insurance is one of the best ways to financially protect your loved ones from the unexpected. You hope to live a long, healthy life watching your child grow, but what if?
Why Dads Need Life Insurance
It’s your responsibility to protect your family.
Your family relies on your paycheck to live. And life insurance is your family’s safety net.
If the unthinkable were to happen, and you were to pass away unexpectedly, your family loses your income while still responsible for a variety of expenses.
A term life insurance policy provides a tax-free lump sum cash payout to your family, known as a death benefit. This can help cover end-of-life expenses such as:
- Funeral and Burial Costs – Your funeral and burial may cost your family up to $10,000 depending on the type of funeral that they select (or that’s stated in your will).
- Legal Fees and Probate Costs – Your family may have to pay probate costs, based on how your will is structured. These fees may be up to 8% of the total value of your estate. Legal fees from any attorneys managing other duties related to the administration of your estate can also be costly.
- Your Medical Expenses – Dying prematurely may bring large hospital bills. Whether death is caused by a serious health condition, such as cancer, or an accident, you and your family will have tried everything possible to increase your chances for survival, which likely means expensive doctors and procedures.
In addition, a term life policy will:
- Maintain your family’s standard of living.
The loss of your income can have a devastating impact on your family’s standard of living—but it doesn’t have to. Your term life policy can provide a replacement for lost income for your family for a term that you select, allowing them to avoid financial burden as they manage their grief.
- Shield them from the negative impact of personal debt.
It’s not uncommon for young parents to be paying off their college tuition. If you have private student loans, then they may not be discharged after you are deceased.
Your creditors may sue your estate for the balance of your loan (or your co-signer) if your loved ones are unable to make payments.
Other consumer debts—such as credit card debt and car loans—may also remain active. Your life insurance policy can pay off these debts or cover payments, allowing your family to remain financially secure.
- Provide a financial cushion for your children, as well as pay for their education.
You and your partner may have plans to cover your child’s college tuition. A portion of the life insurance death benefit can also go to the college savings fund. Anything left over can go to the emergency savings account.
See what you’d pay for life insurance
What is term life insurance?
Term life insurance is affordable and customizable. It’s the best option for most growing families.
Term life insurance can be purchased in terms ranging from 10 to 40 years. It’s temporary, unlike whole life insurance which is permanent.
Most parents don’t need life insurance protection in place for their entire lives. As you get closer to retirement, your debts are being paid off, you and your partners’ retirement savings are building, and your children are becoming financially independent.
Covering Various Responsibilities
You may have different financial aspects you want to protect with life insurance. These liabilities may not all fall within the same time range.
Purchasing multiple term life insurance policies to customize your coverage is a good strategy. This is called laddering.
Laddering life insurance policies allows you to cover different financial responsibilities while taking advantage of the low rates.
» Learn more: How Laddering Life Insurance Can Save You Money
For example, when your child is born, you may decide to buy a life insurance policy to protect them as they grow. You may also want to have coverage in place as you pay off your mortgage.
Your mortgage loan terms may not equal the same number of years you hope to protect your children’s financial futures.
You may opt to buy two separate term policies. They can have different term lengths and coverage amounts if you wish.
The laddering strategy saves you money in the long run. With this method, policies are designed to expire as your coverage needs decrease.
Term Life Insurance Is Very Affordable
Most people overestimate the costs of term life insurance (perhaps based on quotes that they’ve seen for whole life insurance).
The younger you are, the cheaper your life insurance rates will be. Same goes for your health. The healthier you are, the cheaper your life insurance rates will be.
What is whole life insurance?
Just like the name says, whole life insurance provides coverage for your whole life.
It builds up value, based on the premiums that you’ve paid, which you can borrow against or withdraw from over the years if needed.
While that sounds like a benefit to having this kind of coverage, the premiums for whole life insurance are often very expensive—even if you are young and in great health.
Unlike term life, whole life insurance isn’t designed to drop off when you no longer need the coverage (unless you just stop paying it).
If, for example, your son or daughter graduates from college and becomes well-established in their career early on, then you may need less insurance since they’re now self-sufficient and have their own steady income and savings.
Like term life insurance, if you purchase a whole life insurance policy, your coverage amount and premiums will stay the same as long as your policy is kept current (meaning your premiums are paid up).
There are some circumstances that will lead you to decide that a whole life policy makes more sense than term life insurance, such as if you have a large estate or a child with special needs who will require financial protection for their entire life.
However, for most people that we work with, we find that term life insurance is a better fit for them.
Term Life vs. Whole Life Insurance: Making the Right Choice
While here at Quotacy we believe that term life policies are the best option for the majority of families, permanent policies have their place. You’ll need to consider your family’s specific circumstances when deciding between term and whole life insurance.
It’s also very possible that you need a little of both. Use term life insurance to cover your big ticket items, like the mortgage and children’s education, and then supplement it with a small whole life insurance policy as a catch-all.
No one likes to imagine life without their loved ones, but dads who take out life insurance can protect their family from the financial impact of the unthinkable.
The future is always uncertain, but a life insurance policy could help give your family a sound financial footing when they need it most.