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With a new dependant entering your life, considering life insurance is more important than ever. As you begin to look into what policies are available to you, it’s important to keep in mind who will benefit in the event that something happens to you. While it can be difficult to think about, this kind of life-planning is a necessary part of parenting.
Before we go any further, it’s important to understand a couple terms we’ve been throwing around. If you’re familiar, go ahead and skip down. If you’re not certain, or feeling too embarrassed to ask, then just read this section and say to yourself “oh yeah, I totally knew that” after you’re done.
- What is life insurance? Financial protection for your family and loved ones in the event of your death. Life insurance policies pay-out an amount based on the coverage you’ve chosen, and can cost as little as $14 a month.
- What is a beneficiary? The person or entity you’ve chosen to receive the cash benefit from your life insurance policy in the event of your death. This could be a partner, your child, another family member, an estate, or even a non-profit.
Who will actually benefit?
A key point to consider is what the rules in your particular state are. For instance, if you live in a community property state, it’s possible that a spouse could claim a cash benefit regardless of the named beneficiary on your policy.
If you’ve named a minor as your beneficiary, it’s important to also indicate those wishes in your will. It’s possible that a court would be left to decide who receives your payout, and they’re likely to use your will as a guide.
Will you have multiple beneficiaries?
The most obvious beneficiary for your insurance policy is your child. However, protecting their future might involve wisely dividing your life insurance benefit. You may want to consider including your partner as a beneficiary, your parents, or another guardian you’ve picked for your baby. You can also select a “contingent beneficiary” who is someone that will receive your benefit in the event that the first person named passes away before or at the same time as you.
It may also be important for you to consider other financial responsibilities you’d be leaving behind. For instance, if you have a self-owned business, a charity you care deeply about, or outstanding debt like student loans, you may wish to defer some of your benefit to an entity rather than an individual.
How do I start?
Our partners at AIG Direct are a great resource for finding the right life insurance policy to fit your family’s needs. AIG Direct has helped millions of families find term life insurance. Policies typically start as little as $14 a month for $250,000 in coverage.
Tap the button below to get a free quote, and be introduced to an agent who can answer any additional questions you may have. It takes just a couple of minutes to get started.
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