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Why term life insurance is important for new and expecting parents
Term life insurance is a powerful form of financial protection for all Canadians, but it’s particularly important for new and expecting parents. A 2023 study found that 40% of Canadians aren’t financially secure enough to handle the death of a primary income earner, with 42% of those saying they wouldn’t make it past one month. Your children rely heavily on you for financial support. Who would provide for them if you’re no longer here?
Term life insurance provides your loved ones with a lump-sum, tax-free payout if you pass away. This financial safety net offers flexibility, covering everything from daily expenses to debts and funeral costs. As a new parent, the last thing you want to think about is your children being left without one or both of their parents. Just like home and car insurance, you hope to never use it. But having life insurance coverage in place is an essential part of any family’s financial plan.
When is the right time for new parents to buy life insurance?
Just as every family’s journey is unique, the right time to buy life insurance as parents depends on your specific circumstances and financial picture. There’s no single right moment, only the one that best fits your family.
Canadians are often prompted to buy life insurance after major life events like buying a house, getting married, and of course, welcoming a new child. These are key moments in which life is evolving, and it’s critical to consider how your passing could financially impact those closest to you.
There are a few reasons that families should get life insurance coverage as soon as they need it. First, life is full of the unexpected. Typically, you are covered as soon as you purchase your policy, so you can set your mind at ease knowing your loved ones are protected no matter what happens in the short and the long term. Second, life insurance is often more affordable for young parents because rates tend to rise as you age. Since term life premiums are locked in for your entire term, purchasing sooner means taking advantage of lower rates.
Lastly, you don’t have to wait until your child is born to buy term life insurance. Unlike financial decisions like opening a RESP, life insurance can be purchased when you’re expecting—or even before you have a child on the way. Just remember to factor in your plans to grow your family when deciding on your term length and coverage amount.
How much life insurance do parents really need?
Your term life insurance coverage determines the amount of money that will be paid out to your beneficiaries if you pass away. This is often referred to as the death benefit. The more coverage you have, the larger the payout.
Parents often get stuck when deciding how much life insurance to purchase for their family. It’s an understandable challenge because it’s not one-size-fits-all, and the amount you need is highly personal.
Keep in mind that the goal of term life insurance is to alleviate any financial burden in the event you’re no longer around. The Financial Consumer Agency of Canada recommends approximately 7-10 times your annual salary as a good starting point, but here are some things to consider when determining the right amount of coverage for you as a parent.
- Number of children or financial dependents: How many people rely on your income earning ability for financial support?
- Income: How much money is needed to cover the loss of your income for your remaining income-earning years?
- Debt and mortgages: What outstanding debt would you like taken care of?
- Daily living expenses: What additional costs need to be covered for your loved ones to maintain their current lifestyle?
- Other financial contributions: How much do you want to set aside for future financial needs? For example, many parents will factor in the cost of paying for a wedding or post-secondary education.
Tip: Don’t let finding the ‘right’ amount of life insurance prevent you from getting coverage. It’s easy to put off the decision while weighing your options, but every day you delay leaves your family without crucial financial protection. While choosing the right amount matters, having a policy in place is more important. You can always adjust your coverage later to fit your changing needs.
Do you need life insurance for your baby?
To be clear, term life insurance doesn’t directly cover your baby (or other children.) Instead, it covers you, the parent, because there are people depending on your income-earning ability. Blue Cross Life believes in comprehensive family support, which is why our term life policies extend this protection by including $10,000 in free life insurance for each child (and any future additions). While no one ever wants to imagine this kind of loss, our compassionate benefit is there to cover immediate costs and allow you the space to grieve without added financial strain.
When you get life insurance, you typically name your children and/or partner as beneficiaries to receive the tax-free death benefit if you pass away during the term. This is what most people mean when they say they’re buying life insurance ‘for their baby.’ You’re securing financial protection for your family’s needs if the worst happens. It’s crucial to have coverage right from your child’s infancy to ensure their financial support as they grow.
What to look for in term life insurance policies for young families
Younger families have unique term life insurance needs. Even dual-income families can face the potential of financial hardship if one earning parent were to suddenly pass away. Fortunately, policies are highly flexible and can be customized to suit your family’s specific circumstances.
Here are some things to look for when choosing the best life insurance for a young family:
- Length of term: Young parents typically have more income-earning years remaining. There’s also a longer period of time before children become financially independent. So young families often choose providers with longer term lengths available.
- Amount of coverage: Having a wide range of coverage amounts to choose from makes it easy to find a life insurance plan that meets your family’s budget and needs.
- Flexibility for changes: For many new parents, the future can feel unpredictable. You may need more (or less) coverage in the future, so it helps to choose an insurer that makes it easy to update and purchase more life insurance as your life evolves.
- Perks for families: Some insurance providers offer extra benefits designed for families. In addition to $10,000 in free life insurance for each of your dependent children, Blue Cross Life also offers a 10% discount on first-year rates for couples.
Get life insurance for new parents with Blue Cross Life
Blue Cross Life helps parents secure affordable and comprehensive term life insurance for their families. Benefits include:
- Flexible term lengths from 10 to 30 years.
- Coverage amounts from $100,000 to $5 million.
- $10,000 in free life insurance for each child and any future children.
- 10% off rates in your first year when purchasing as a couple.
- 30-day grace period for missed payments.
- Free cancellation with no penalties or fees.
Get an instant term life insurance quote online in just a few minutes.