Stuff Happens

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This is a delicate subject but one that younger parents tend to ignore: Life insurance. Because of a lack of knowledge and that feeling that nothing can happen, that everything will be just peachy. Except that this isn’t always the case.

Young parents can have accidents or illnesses that leave them disabled for short,

 long periods of time, or even for life; sometimes tragedy strikes and they die young, as well. It happens.

This leaves their children not just growing up without parents, but also growing up without their financial blanket.

We cannot avoid the tragedies of life, but we can be smarter about it and think of providing for our children in case we become disabled or die. Obtaining life insurance simply the right thing to do and it should be part of every family’s financial planning.

Did you know that the average consumer, before obtaining a life insurance premium, believes it to cost three times as much as it actually does?

Term versus whole life insurance

Term insurance is cheaper because it covers you for a specific period of time such as 10, 20 or 30 years.That means that the insurance will be

paid out if you die within the period contracted. This type of insurance is a good if you want to safeguard the financial security of your spouse/partner and children while they’re growing up. Say you have children ages 3 and 6, a 20-year policy would have their financial wellness insured until the youngest is 23 years old. Term insurance is usually the best option for young healthy parents.

There are other reasons to obtain term life insurance: to cover the length of time remaining on your mortgage, so that the family home will be safe; it also helps for entrepreneurs: if you have business loans outstanding, it would be prudent to have term life insurance to pay those off in the case of your passing.

Whole life insurance is that, coverage from the moment you hire it till the moment you die. It’s pricier, and is usually a policy that works also a savings conduit; that’s because many policies invest a portion of your premium payments, and the profits become a pool of money that you, as the insured, can access tax-free during your lifetime.

When to get insurance? How much will it cost?

The younger you are the cheaper it is. Most insurance policies require that you undergo

some type of physical checkup. Be aware that smoking will increase the cost of your insurance policy.

Cost varies but there are some very affordable options. I asked Boris Fernandez from UNFCU Financial advisors, to provide sample quotes to give us an idea, and attached are pricings for term life insurance of $250,000 for non-smoking healthy male and female policy-holders age 35. As you can see, the most expensive policy would cost under $25 a month. He also provided a very useful guide on insurance that he has from one of the companies they work with, Prudential Insurance.

How much policy do I need?

Asking this is the wrong approach. Instead of thinking how much you’d like, think of what

you can afford not just now but what you expect your expenses to be in the future: will you be buying a home? Will you have more children? These are expenses you must consider now, not later, so that you can obtain a policy that you know you’ll be able to afford. Once you know what your budget will allow, sort out coverage options. If you are going to term life insurance, imagine being gone tomorrow and how much you’d like your remaining family to have for the years to come. The key is to strike a balance between what you could afford and what you’d like them to have if you’re gone.

Should both parents be insured?

Yes. Anything can happen to either one of you. And if you consider not doing it because one of you is a stay at home parent, think this: you would have to replace the care for your children if you/he/she were gone. 

How do I find out more information?

If you’re ready to look into this further, I will suggest that you speak to Boris Fernandez from

UNFCU Financial Advisors. He speaks English and Spanish and will provide free consultations on your insurance options. You may contact him via email to request an in-person or over the phone meeting with him.

Additionally, we plan on having a live presentation or webinar hosted by the Credit Union and mister Hernandez soon. Keep an eye on your email and the Credit Union’s Twitter feed @OASFCU!