Dependent children require resources for health, maintenance, support and education. Some support is provided through guidance while other support requires money. Parents must provide both but what happens if the parents aren’t there to provide either?
The first step is crucial: have reasonable life insurance.
Could you imagine raising someone else’s child if the parents left no money? Most current statistics state raising a child to the age of 18 costs $250,000. Costs are higher in the earlier years due to doctor visits, diapers and daycare. On the back end, higher education could require additional money beyond age 18.
Even if only one parent is gone can the remaining parent alone afford mortgage payments, taxes, utilities and the costs of raising children?
What would the quality of life be for the surviving parent?
A family with one young child should consider having $500,000 in coverage.
What are your life insurance options? Three common forms are term, universal and whole life. Universal and whole life insurances are more expensive because they never terminate if you properly pay your premiums. Part of the premiums builds cash value, which one can borrow against or withdraw.
For many families term insurance is the best option because it is much cheaper and ends when needs for life insurance often diminish. It does not continue indefinitely nor does it build any cash value. If the term is 20 years, you pay the same premium for 20 years and after 20 years the policy ends.
How much does term insurance cost? $500,000 of coverage for a healthy, non-smoking parent is often less than $40/month.
It’s a good idea to have coverage on a stay-at-home spouse to help cover child-care costs and future retirement earnings if that parent were to return to work when dependent children are older. Continue reading ‘3 Estate Planning Steps For Young Families’ »