A New Parent's Guide to Life Insurance in Bristol, CT

Mar 04, 2021

Life Ins

A New Parent's Guide to Life Insurance in Bristol, CT

Becoming a parent in Bristol, Connecticut, is such an overwhelming joy. Still, it comes with an increased sense of responsibility, so you'll want to consider ways to better protect your family, especially the newest little family member. Fortunately, as a new parent, life insurance and Medicaid give you the means to cater to the medical needs and future financial needs of the ones you love.

If you just had your first child, here's a straightforward guide to different types of insurance for parents like you.

What is Life Insurance?

Life insurance is a cover that guarantees to pay a specific amount of money to listed beneficiaries upon the policyholder's death. In exchange for the insurance benefits, the policyholder pays premiums for a specified period of time, or throughout their lifetime, depending on the type of coverage they have.

While each type of life insurance has certain unique attributes, the main components are:

  • Death benefit: This is the money your insurer will pay out to the beneficiaries named in your policy, usually your kids and spouse, when you pass away.
  • Premiums: This is the amount you must pay to your insurer at specified intervals and within the agreed duration to qualify for the death benefit pay-out.
  • Cash value: This is the investment component of your policy that you can tap into while you're still alive. It's only available with specific types of life insurance, and it allows a portion of your premiums to go into an interest-accruing cash account. 

Who Needs to Buy a Life Insurance Policy?

Anyone with one or more dependents needs a life insurance policy, whether that dependent is a parent, a spouse, or even an adult child. If you're a new parent, you may need to buy such a policy mainly because you now have a little one that could use your financial protection, especially when you're no longer there.

For example, if you buy a $1 million life insurance policy and continue to pay your premiums as agreed, your insurer will pay that amount to your spouse or kids when you die. The money can support your family in many vital ways, including paying for your children's education or your mortgage.

Different Types of Insurance Plans

There are two broad categories of life insurance with a diverse range of unique properties and benefits to the policyholder. These main options are:

  • Term life
  • Permanent life

Term Life

Term life insurance is a policy you typically take out for a specific coverage duration. It's one of the more attractive options for new parents, especially because it's also the most affordable. You, the policyholder, get to decide when you want the coverage to expire. For example, you could choose an expiration of 10, 20, or 30 years.

Additionally, you may opt to buy level term life insurance, which requires uniform premium payments throughout the policy duration. Also, you have the policy option of increasing your term life insurance, which allows you to pay lower premiums while you're younger. The premium rates rise as you get older.  

Permanent Life

Permanent life insurance covers you for your entire lifetime, provided that you continue paying your premiums or you don't surrender the policy. It can be more expensive, especially for younger parents, but it pays out regardless of the policyholder's year of death. Most types of permanent life plans include a cash value portion against which you might be able to withdraw money, pay premiums, or take out a loan while you're still alive.  

Different types of permanent life insurance include:

  • Whole life: Includes an interest-accruing cash value component
  • Universal life: Includes cash value, but its premiums and death benefit can be changed over time
  • Guaranteed universal: Doesn't have an investment portion but has cheaper premiums than the whole life alternative
  • Variable universal: Lets you invest your policy's accumulated cash
  • Indexed universal: You may invest the cash value portion of your premiums on a fixed or equity-indexed account

How Much Life Insurance Should You Buy?

As a new parent, you'll want to think about your financial circumstances and your family's financial needs when taking out a life insurance policy. Be sure to choose a death benefit that can support your family's standard of living when you pass away.

Here are some factors that may impact your life insurance amount: 

  • The total income that you need the death benefit to replace or provide when you die
  • Loans, mortgages, your children's college costs, other financial obligations
  • Any service or utility costs you're currently paying that your family will still need after you're gone
  • You may deduct any savings or other potential insurance pay-outs that could financially support your family

Understanding Life Insurance Riders

Riders give you the ability to personalize any of the different types of life insurance for parents. While riders can increase your premiums, they let you modify your plan based on personal preferences or circumstances, such as:

  • The accidental death benefit rider increases your life insurance coverage if your death results from an accident rather than a natural cause.
  • With the waiver of premium rider, you may be allowed to stop paying your premiums if you're incapacitated or unable to work and earn.
  • With the disability income rider, your policy pays you a monthly income if you can't work for several months or longer because of a severe illness or injury.
  • The long-term care rider can pay the policyholder an accelerated death benefit, such as if they need in-home care or assisted living services.

Hopefully, this information will enable you to choose the right health and life insurance plan for your family, including your little ones. If you need help figuring out how much coverage you need and what benefit each option provides, don't hesitate to contact the experts at CV Mason Insurance Agency in Bristol, Connecticut. We have the expertise and experience to help you obtain a personalized life insurance plan based on your financial circumstances and goals.