Don’t be ‘THAT’ parent

Jono and Sangita looked at their screen and felt instantaneous relief.

The numbers staring back at them were remarkably affordable.

“I thought it was going to be so much more,” Jono said to his wife.

Sangita replied “Me too. Let’s get this done.” 

Jono and Sangita completed their term life insurance transaction right there and then, put their new baby to bed and got back to the latest episode of Yellowstone with no anxiety looming over them…

Earlier that week a close family friend, the same age as Jono and Sangita, 38, passed suddenly while on a run by the lake, leaving behind two young children and her partner. 

The grief hit Jono and Sangita like a tonne of bricks. And, they decided to finally take action to protect themselves and their new baby. 

Like over 33 per cent of parents out there, Jono and Sangita had no life insurance prior to this event… and less than a months’ worth of an emergency cushion. 

Sure, they’d heard about life insurance in the past, but had the perception that it was going to be super expensive. Once they did a little digging, however, they started to understand that there was a much more affordable option out there called term life insurance, and the entire industry has become much more consumer friendly thanks to technology breaking down traditional barriers to coverage. 

The rationale for insurance

There are certain times in your life when you’ll need life insurance more than other times. Specifically when you have a young family, a mortgage, a business and/or other liabilities (money owed to lenders). But, this is the exact time in life when your budget is the tightest, leading to the temptation to cancel the insurance policies in exchange for putting more money back into your monthly budget.

Don’t do this! 

If you, or your spouse were to pass away, the financial consequences could limit your ability to pay for your home, put your children through school, or simply cover regular living expenses or funeral costs.

Over time, you’ll need less insurance because your debts will be paid off, your children will move out of the home, and you’ll hopefully have more in savings. So, reevaluate every five years to see if it makes sense to dial-back your coverage.

Determine what you need

The first step is to evaluate all of your current policies. Dig them out of your employer’s handbook (yes, most employers offer some kind of coverage), grab the other policies from your filing cabinet at home and review what you currently have. Specifically look at the value of the policies and what kinds they are - life, disability and critical illness are most common.

Next, review what you have relative to what you need. This is the part where doing some research online and grabbing a quote from the PolicyMe.com website (or even through one of their pros using their 1-800 number) can help you. If you’re not sure how much coverage you need, check out their recommendation calculator to help simplify this.

Many parents find themselves coming up short on coverage, which is why affordable term life insurance is a go-to as it fills the gaps. Note that term life insurance is adjustable and temporary, meaning if you don’t pay your premiums, you’ll lose your coverage… so don’t forget to pay your premiums! 

The amount you need is generally calculated as the cost of your funeral and replacing your income to cover your household expenses (including paying off the mortgages) for the next 20 years. So, don’t be surprised if your insurance professional suggests a $1.5 to $2 million term policy if you’ve got a young family (and don’t freak out, it’s less expensive than you think).

Affording your policies

Yes, insurance will cost you money, and that’s why you need to shop around for the best rates relative to the best coverage, and make room in your budget. Take a look at cutting out unnecessary spending on restaurants, car washes, clothes or entertainment. The actual costs are going to depend on your age, health, income and so on. But, it's likely that if you’re a healthy parent in your 30s, needing over $1 million in coverage (but less than $2 million), and you don’t smoke, you’ll need to find between $75 to $200 per month in your budget to pay for your insurance. 

Now, let’s just say you have a tight budget, or find yourself needing much less insurance than in the above example. You can dial down your coverage. A $500,000 policy for a 35 year-old healthy male non-smoker would be close to $55 per month with PolicyMe, for example. 

My point is this, some coverage is better than nothing in almost all cases. 

I know. I know. Thinking about death is gross. But, you need to do it while you’re healthy, not after it’s too late. Don’t be that parent who isn’t properly protecting their family!

Note that you and your partner (if applicable) will likely need additional coverage if you become ill, or unable to work. These policies are called critical illness, and disability coverage, and they are typically provided through traditional insurance brokers. I suspect this will change, and be something people can access online in the coming years as insurance technology continues to evolve.

*This article is brought to you in partnership with our friends at PolicyMe.com