As a new parent, we all make mistakes. I know I did; some more expensive than others. Did I really need to buy those adorable onesies I saw on Pinterest and couldn’t resist? One-hundred-and-twenty dollars later, that one still stings. But while spending too much on cute baby gear isn’t likely to put you in financial ruin, not having the right insurance policy might. Knowing where to start can be overwhelming. When I started looking into life insurance when I had my first baby, I would pick up the phone, start to dial and then realize I had no idea who to call or what to ask, so instead I would grab a snack, curl up and take a much needed nap. But I've learned a lot after going through the process myself and the good news is, it’s not as overwhelming as you might think.
Do you need life insurance?
Of course, we all hope that we never really need life insurance, but Meldy Harris (CFP) with Sun Life Financial says, “When it comes to life-insurance, you don't need it – until you need it. And if you have people in your life, especially children who rely on you, having life insurance is about having a protection vehicle to secure you and your family financially.”
You don’t need to become an insurance expert
You could spend hours calling, Googling and crunching numbers to figure out what policy you need and how to get the best price, but who has time for that? In my experience the most efficient way to ensure you get the best coverage for a price you can afford is to get an insurance representative referral from someone you respect, admire and trust like your boss, colleague or mentor. Someone whose referral will be truly valued. My husband and I use the same insurance rep that my in-laws have used for years. Think he’s going to mess us around and sell us something we don’t need at an inflated price? Nope, he’s going to make sure our family is safe and secure and make sure we’re not paying more than we need to for the coverage we need.
Keep it simple
Generally speaking, a term policy is best for a young and growing family. A term policy will have a set duration limit on the coverage period. For a young healthy couple a good rule of thumb is get a policy that covers enough to equal four to five times your annual salary. Cost will vary depending on a number of factors including your age, gender, health and lifestyle.
Don’t forget about disability insurance
You also want to make sure you have disability insurance. You are far more likely to get injured than to die, so the potential need for disability coverage is greater. Check with your employer to find out if you have any coverage, then take a look at your monthly budget and figure out how much money you would need for your monthly expenses if you were to ever get injured and couldn’t work. You may need to buy a supplemental policy to cover what’s left uncovered by your employer’s plan. And if your employer doesn’t provide any disability insurance, you should buy your own.
Set it and forget it
It doesn't matter what policy you have; if you forget to pay your premiums your coverage could be void. So to truly rest easy, set your monthly premiums to come out of your bank account automatically. I’ve heard heartbreaking stories from families who have gone through horrific tragedies, only to find out that in the midst of the chaos a payment wasn’t made to cover their premiums, therefore voiding their insurance coverage.
No one should have to face financial ruin when dealing with a devastating loss, so take action now to protect the financial security of your family. Then go enjoy a much-needed nap – you deserve it.
4 questions to ask your insurance representative
- What certifications do you have? You want to look for a CFP (Certified Financial Planner) and or CLU (Chartered Life Underwriter) designations.
- How long have you been in this business? Finding someone with years of experience working with families is added value for you.
- What is involved in this process? Do you need to take a medical exam, and what paperwork is part of the process.
- What do you like about being in this business? This is a question many people don’t think to ask, but finding a professional with a passion for working with families, someone who loves helping people secure themselves financially is important.
Originally published in ParentsCanada magazine, November 2014.
