Most new parents do best with a term policy that lasts until the youngest child is grown. Get enough to replace your income and cover the costs of raising your child.
Kids cost a lot. The USDA figured a middle income married couple would spend $233,610 to raise a child born in 2015 to age 17. That does not count college.
Social Security can help if a parent dies. A child can get 75% of the parent's benefit. A parent caring for a child under 16 can get 75% too. But there is a family limit, and it rarely replaces a full paycheck.
Term life is often the simplest fit. You pick the years you need, like 20 or 30. If you die in that time, your family gets the money. Most term policies have no cash value, which is why they cost less.
Tips that help
- Pick a term that lasts until your youngest is out of school.
- Add up income, the mortgage, child care and school costs.
- Do not name a baby as your beneficiary. The NAIC says to look at a trust or your estate instead.
- Check what your job offers, but do not count on it alone. It may end if you change jobs.
- Both parents need coverage, even if one stays home.
Coverage that fits
Common questions
Can my baby get the money directly?
Not easily. A minor child cannot manage the money. The NAIC suggests naming a trust or your estate instead.
Is the payout taxed?
Usually not. The IRS says death benefits paid to a beneficiary are generally not income. Interest paid on top of it is taxed.
Will Social Security cover my kids?
It can help. A child can get 75% of the parent's benefit, but a family limit of 150% to 180% of the parent's benefit caps what the whole family gets.
