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Life Insurance
What Is It, and How Much Do You Need?
By Megan Fowler
"Often, new parents don't understand that there are a lot of unexpected costs when you have children," says DerKacy. One parent not working and staying home with the baby for the first few years is a huge economic contribution. If something were to happen leaving a single parent, insurance is there to cover the expense of outside childcare. The purpose of the insurance is to provide for the remaining parent and children in such a way that they don't have to cut back or go without anything the family is used to.
Financial advisors at www.insure.com suggest the following rules to guide you through your need calculation: your short-term needs (final expenses, outstanding debts, and emergency expenses); long-term needs (housing payment); education (dependents' college tuition); family maintenance (child care, food, clothing, utility bills, insurance and transportation) and assets such as savings, stocks, bonds, mutual funds and other life insurance.
It's recommended to have anywhere from five to 10 times the amount of your annual income in life insurance coverage. Monthly payments are usually taken directly out of your bank account and vary depending on what kind of insurance policy you purchase. It is also recommended to have six months to one year's salary as a "just in case" fund, especially with first-time parents.
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