Ask the experts: Insurance

By Published On: September 6th, 2011
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This month we’re launching a new weekly series called “Ask […]

This month we’re launching a new weekly series called “Ask the Experts.”Each Tuesday we’ll bring you information from those in the know about topics ranging babywearing to fitness to prenatal nutrition and more.

Today Nancy Behrens, a mother of four and vice president of operations for State Farm’s Life/Health insurance business, offers recommendations on how to evaluate your family’s insurance needs prior to the arrival of a new baby for our prebaby paperwork series.
The check list
Crib. Check. Swing. Check. Diapers. Check. Wipes. Check. The list goes on and on when preparing for a new baby’s entrance into the world. But how often are life insurance and disability policies on that list? It’s safe to bet the answer is almost never.
Choosing insurance plans certainly is not as fun as picking out a jungle-themed nursery pattern or tiny onesies with matching sock sets, yet in the long run, having the right policies in place will be the gift that keeps on giving. There’s absolutely no replacing a parent or child who has passed, but having financial security and coverage during a time of crisis does offer surviving family members a peace of mind and the ability to continue their standard of living.
Biting the bullet
Starting the conversation about insurance needs with a spouse, partner or other family members before a baby’s arrival can be uncomfortable and unappealing, but it’s a first step in becoming a responsible parent. A recent State Farm survey found that 77 percent of adults in the U.S. say they’d feel more prepared for the unexpected by having life insurance. They survey also revealed the number one reason for not purchasing a policy is the cost.
Calculating insurance needs
While many people say the cost keeps them from buying a life or disability policy, there’s an affordable plan for everyone. Many adults have health insurance and some life insurance and disability coverage through their employers, but it’s usually not enough. Below are guidelines for recommended family coverage levels and associated costs:
Family breadwinner(s)—Life insurance and disability coverage for the parent(s) who are financially supporting a family is crucial if, at some point, death or disability eliminates that income. A general rule of thumb for the amount of life insurance coverage needed is 10 to 15 times an annual salary or income, and for disability coverage, enough to replace 50 to 60 percent of a salary. These dollars would go to mortgage/rent payments, heath care costs, day-to-day living expenses and education costs, among others.
For many new parents, adequate term life insurance can be purchased for less than $50 per month—perhaps less than your cable bill. While permanent policies cost more, they provide additional long-term advantages by building cash value, which can provide funds for college expenses down the road or to supplement retirement income.
Stay-at-home parent—It’s just as important to insure a parent who is at home caring for a child as it is to insure one who works because in the unfortunate event that this parent dies, an array of new responsibilities would fall to the surviving spouse. The new tasks may include childcare, transportation service, cleaning, grocery shopping, cooking and other household-related demands that could be valued at $40,000 per year or more. Investing in life insurance to cover these expenses is smart and savvy.
Baby—While you may not think about buying life insurance for your baby, there are a lot of good reasons to do so. Once parents are adequately covered, having permanent life insurance on a child locks in a low rate and can serve as the foundation for a long-term life insurance program for that child. The death of a little one is an unthinkable event, and yet a life insurance policy for a child would cover funeral and medical expenses and give the family time to grieve without the added burden of financial stress.
To find out how much life insurance coverage your family needs, try State Farm’s new interactive life needs calculator. The animated tool takes into account different variables, including employment status, number of dependents, amount of debt, mortgage/rent payments, college savings plan and more for individuals and families. Just like a new car seat that first-time parents take hours to install to protect their newborn, having sufficient life and disability insurance policies in place also helps families feel more secure about their baby’s bright future.

Next week on Ask the Experts:Financial planning for parenthood
Have a question you want answered?Email us at with the subject line”Ask the Experts” and we’ll scout out the expert knowledge you need.

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