What do we need to do about Life Insurance? New Baby!!

by Julie and Steve
(Toronto)

We are new parents and are wondering about life insurance. We want to do the best for our baby girl and we want to make sure that we are able to take good care of her if one of us were to pass away. Please give some advice.

How much do we need? Should we get it through work? What do we need to do about this?

Thanks for any information you can provide on life insurance for new parents! Please help us get started...

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ANSWER Hi Julie and Steve

Congratulations! Being a new parent is a wonderful (and tiring ;-) ) experience. It is amazing how becoming a parent puts things in perspective.

You are wise to consider your life insurance needs at this time. I do not know much about your situation so I will only answer in very general terms.

First, you should consider coverage for your final expenses (i.e. funeral and taxes) plus enough coverage to provide future income. In other words, if one of you were to die, you should plan to replace a large portion of that persons income until your child is at least 18. On top of this you will probably want to establish an education fund and pay off any debt.

Once all of this is calculated it is not uncommon to buy 10-20 times your income in coverage. I know that sounds like a huge number, but if you sit down with a professional advisor and work through it I am confident that you will arrive at a figure that is quite significant.

To answer your question about buying additional coverage through work: I don't recommend this. A plan through work is a nice bonus but you have far less control. If the company closes or you change jobs you might very likely lose your coverage without any opportunity to keep it. You have much more control and stability with a privately owned plan

Another tip: Your budget is probably tight right now and your need is the biggest while your kids are young. To get the most coverage for a temporary need you will probably end up looking at Term Life Insurance. It is wise to consider some permanent insurance as well for your longer term needs.

Hopefully this very brief synopsis is helpful. Make sure to sit down with a professional advisor to get detailed advice to suit your needs and exact situation. For ideas on where to go check out this page:

Buy Life Insurance