As a parent, you become an expert in backup plans. You stock up on extra toys, pack snacks for the road, and always have a backup babysitter on call. But what about the biggest backup plan of all—making sure your family is financially protected if something happens to you or your partner?
That’s where life insurance comes in. Along with writing a will, getting life insurance is one of the smartest ways to make sure your loved ones are covered if the unthinkable happens. Here’s what young families need to know about life insurance.
Why Life Insurance Matters
Life insurance isn’t about dwelling on worst-case scenarios. It’s about making sure your kids are taken care of if life throws you a curveball. From the moment you become a parent, someone is relying on you completely, and that’s a big responsibility. Think of life insurance as a financial safety net. It’s not just about replacing income. Even if one of you stays home with the kids, the value of the work you do is huge. From childcare to keeping the household running, that contribution needs to be protected, too.
Picking the Right Life Insurance for Your Family
Term Life Insurance
Term life insurance is a popular choice for young families because it provides coverage at the most economical way possible. For example, it’s ideal for parents with young children to get $500,000 in coverage for as little as $20 a month. To get It’s also a smart option for families relying on a single income, as it offers a safety net to replace that income during critical years. Another common use is to cover major expenses like your kids’ education, ensuring they can still attend college even if you’re not around. When money is tight, term life insurance is often the best choice. It’s budget-friendly and gets you the coverage you need during the most crucial years.
Permanent Life Insurance
Permanent life insurance never goes up in price and builds cash value over time, offering a combination of protection and savings. It’s often a go-to choice for families with unique needs, such as ensuring lifelong care for a child with a disability or providing financial support for dependents long after you’re gone. This policy can also be an effective tool in estate planning, helping to cover estate taxes or leaving a legacy. While it typically costs more than term life insurance, the added benefits—like guaranteed coverage for life and the ability to borrow against the policy’s cash value—can make it a valuable investment for families who need lasting financial security.
How Much Coverage Should You Get?
Figuring out how much life insurance you need as a young family is about balancing current financial responsibilities with future goals. Start by considering your family’s needs—how much your income supports daily expenses, debts like a mortgage, and what you want to save for your kids’ future, such as their education. You’ll also want to think about how long you need that coverage. If your kids are still young, a 20-year term can help protect your family until they’re ready to be independent. While many aim for coverage that’s five to ten times their annual income, it’s important to adjust that based on your unique situation.
In addition to basic coverage, consider the potential impact of other life events. For example, if one partner plans to stay home with the kids, you might need extra coverage to offset the loss of a second income. Or, if you plan on having more children, the coverage amount you choose now should account for those future additions to the family.
What Will Life Insurance Cost?
The good news is that life insurance in Canada can be more affordable than you think. Your premium depends on your age, health, and lifestyle. The younger and healthier you are, the better rates you’re likely to get.
Choosing a Beneficiary
Naming the right beneficiary is a big decision, especially when you want to make sure your kids are taken care of. In Canada, minors can’t directly receive a life insurance payout, so you’ll need to plan for that. Most partnered parents name each other as beneficiaries. Single parents or those with more complicated family dynamics might want to set up a trust to make sure the money is used for their kids. A contingent beneficiary might be advisable, it’s used as a beneficiary if the primary beneficiary is not alive at the time of your death.
Other Points to Consider for Life Insurance
Riders for Added Flexibility
Riders are additional benefits that you can add to your policy for extra coverage. For example, a child rider allows you to add coverage for your children under your policy, while a disability waiver of premium rider ensures your policy remains active without premium payments if you become disabled and can’t work.
Critical Illness Insurance
Critical illness insurance provides a lump sum payout if you’re diagnosed with a serious illness covered by the policy. This can help cover medical bills, living expenses, or other costs during recovery, taking some of the financial burden off your family.
Taking care of your family’s financial future is just as important as making sure there’s a roof over their heads or that they have access to quality education. Life insurance is that extra layer of security every young family needs. Our team at Keller & Associates Insurance Brokers is here to help you choose the right insurance policy that works best for your situation, taking into account your expenses, income, and goals. Let us guide you through the process so you can rest easy knowing your loved ones will be taken care of.