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Tips for new parents considering purchasing a life insurance policy

By ALEX VEIGA, Associated Press Published: May 18, 2014

Few personal milestones compel someone to buy life insurance coverage like becoming a parent.

In the event of an untimely death, life insurance can serve as a financial safety net to ensure there’s money available to pay for everything from medical bills to a home mortgage and the future college education costs.

Many Americans have taken steps to line up such a financial cushion. At the end of 2012, there were 146.2 million individual life insurance policies in effect, with coverage totaling $11.2 trillion, according to the American Council of Life Insurers.

Here are five tips for new parents looking to buy life insurance:


Life insurance policies can vary widely, but they generally fall under two categories: Term insurance and permanent insurance, which are often referred to as whole life or universal insurance.

With term insurance you pay a premium for a set period, commonly 10 years or 20 years, and your policy entitles you to a specific amount of money. Unless the policyholder dies, triggering a payout, any premiums paid are lost once the policy term ends.

In contrast, whole life insurance policies cover insured individuals as long as they live. A portion of the premiums paid for the policy are invested to provide a pool of money that the policyholder can access, tax-free, while they’re still alive. Such policies are generally more expensive than term life insurance, however.

Andrew Porter, a certified public accountant in LaFayette, California, advises clients who are new parents to avoid whole life insurance. “The cheapest form of insurance, generally speaking, for healthy, young adults is term (policies),” Porter said.


Generally, an insurance agent will help you determine an appropriate coverage amount for the policy by examining some of the key costs your family will have in years to come, such as the cost of child care, education and the mortgage.

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