As a first-time dad, life insurance may not be the first thing on your mind, but it is deftly something worth considering.
Providing for your family and giving them a degree of security on your death will also give you peace of mind. Finding the right life insurance plan for you is the next challenge, where do you start?
First-time dads should make sure they have life insurance to protect their family. Many companies specialise in providing insurance for men. Life insurance will provide a pay-out if you were to die or become critically ill, depending on your cover.
When welcoming a new addition to your family, you will have so much on your mind, new things to learn and challenges ahead. No matter how difficult the subject is to approach, financial security for you and your family is something to consider as early as possible, which will include life cover.
Read our guide to being a first time dad and how a life insurance policy can provide peace of mind.
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For the vast majority of parents, the first few months with a new baby can be challenging physically, mentally and financially. However, the ever-rising cost of living means that you should consider life insurance as soon as possible.
Your partner may be off work for a while, you may have limited income, but how would they cope in the event of your death? Life insurance doesn’t have to be expensive as you can structure a policy around your situation and your finances. Perhaps the question you should be asking is, can you afford not to have life insurance?
This will depend on your financial situation and what you can afford. The most affordable type of finance is term life insurance which basically covers you for a set period of time. Your beneficiary will only receive a payment in the event of your death during the period the policy is live, but this can help with mortgage liabilities.
A whole of life policy is one that lasts as long as you maintain your premiums and will pay out whenever you die - there is no fixed term and no expiry.
In some cases, you will need to undertake a medical prior to taking out a life insurance policy. You will also notice that there are numerous exclusions that are not covered. These include drug/alcohol abuse, taking part in risky sports and some sexually transmitted diseases such as HIV. The terms and conditions will vary from provider to provider, and it is important to make yourself aware of the small print.
It may be possible to obtain life insurance even if you have an existing medical condition. The life insurance company would simply exclude that particular condition from the policy so for example if you have heart problems and died from a heart-related issue then your policy would not payout.
This makes perfect sense because the life insurance company would be taking on an existing risk.
This is akin to asking how long a piece of string is - it will very much depend on your individual circumstances. For example, many people find solace in taking out life insurance which would repay their mortgage in the event of death.
This ensures that in a worst-case scenario, their family won’t have any mortgage payments to cover and will always have a roof over their heads. It is possible to take out decreasing life insurance cover which would mirror the reducing liability with, for example, a capital repayment mortgage.
There are six basic elements upon which the cost of life cover is based. These are age, health, lifestyle, smoking habits, the term of the policy and the amount of cover required. In theory, younger people are far less likely to die from a certain medical condition.
Therefore, all things being equal, compared to an older person; therefore, their premiums will be much lower. The cost of premiums is also based upon statistical analysis of the population which will highlight certain risks for certain age groups.
Simple, you would add your partner as the beneficiary of your life insurance policy. In the event of your demise, upon providing evidence of your death, the policy payment would go directly to your partner. If your circumstances were to change, you can change the beneficiary of your life insurance policy at any time.
Under normal circumstances, any life insurance payout would be free of both capital gains tax and income tax. There may be scenarios where an insurance payout would be brought under the deceased’s estate and may incur inheritance tax but not under normal circumstances.
The idea of life insurance is to provide as much capital as possible to those left after your death.
This is an impossible question to answer. The level of life insurance required will vary from individual to individual. It will depend upon your income, affordability, debts, financial obligations and the cost of maintaining your current family lifestyle. Therefore, it is advisable to take financial advice when looking at life insurance is a first-time dad.
One of the main issues with life insurance for those starting a family is the temptation to look at insurance and general finances separately. The reality is these two elements are intrinsically linked, and therefore they should be considered together.
For example, as your family grows, you may require a larger property. This may involve an increase in your current mortgage. So, if the original life insurance policy was structured to cover any mortgage liability upon your death, it may well need to be adjusted.
As the term suggests, an independent insurance broker has no formal ties to one or a relatively small group of insurance companies. A tied insurance broker is only allowed to deal with a relatively small number of companies – they will not have access to the wider market.
At first glance, many people automatically assume that tied insurance brokers cannot match or better the terms negotiated by independent insurance brokers. In reality, both independent insurance brokers and tied insurance brokers will have close relationships with a relatively small number of parties.
Yes, an independent broker will have access to new entrants to the market who may be offering competitive terms. However, a tied insurance broker may well be funnelling significant business via a close-knit group of partners.
As a consequence, they should be able to negotiate extremely competitive terms which will often match or better those of an independent broker. This argument has been ongoing since the start of time, but it isn’t straightforward!
Yes. It may be that your situation changes for the better, your career blossoms and your income increases. You may feel that you can afford an additional insurance policy offering greater financial support to your family upon your demise.
While many people automatically look at a new life insurance policy, it may be possible to adjust your existing policy. As a consequence, it is worth approaching your insurance broker/insurance company to discuss the options.
The fact that the life insurance sector is extreme competitive means the majority of insurance companies will be relatively flexible. After all, they want to keep your business?
In the event of your demise, and that of your primary beneficiary, any life insurance payments would go to the main beneficiary of your estate. If there was no will in place, then the funds would be distributed by the courts.
The best way to ensure that your children benefit from the payment is to appoint a second beneficiary whom you trust to manage the funds on behalf of your children. This arrangement could be made more formal with a legal declaration, so both parties are protected.
You will come across the term “written in trust” if you read the small print of any life insurance policy. This is a traditional option that basically allows you to segregate any future life insurance payout so that it is shielded from capital gains tax, income tax and inheritance tax. In some cases, life insurance can get a little complicated, and it is worthwhile taking advice.
Income protection insurance is very popular amongst the self-employed as a means of protecting their income in the event that they are not able to work due to injury/illness.
While traditionally more expensive than life insurance cover, it is maybe something to consider if you are the main income provider for your family.
While life insurance policies will pay out upon death, and some policies may pay out on diagnosis of a terminal illness, critical illness insurance is there to cover serious illness. Upon diagnosis of a serious illness, one which will limit your working capacity, you would receive a tax-free lump sum.
It may be useful to look at payment protection insurance (PPI) or short-term protection insurance which offer varying degrees of financial assistance in the event of illness, accident or redundancy.
When you have a new mouth to feed, it can be difficult to focus on the financials and put it in place cover for the future. However, life insurance will give you and your family peace of mind that liabilities such as a mortgage will be repaid in the event of your demise.
The importance of life insurance will become more relevant as your family grows. With the cover in place, you can enjoy being a first-time dad!
Here at Money Savings Advice, we have partnered with some of the UK’s leading Life Insurance brokers. They have already helped thousands of people get the best Life Insurance cover and they can do the same for you.
Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.
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