Life Insurance for New Parents: The 30-Minute Checklist Before the Baby Comes

Both parents need a policy, including the one at home

The earning parent is obvious. The stay-at-home parent is the one families skip, and it is a mistake. Replacing childcare, transportation, cooking and household management for a family with young children costs $40,000–70,000 a year in most of the country. A $500,000 20-year policy on a healthy 30-year-old non-earning parent is typically $20–30 a month. Buy it.

How much, for how long

Use the worksheet, but the typical answer for a household earning $100,000–150,000 with a mortgage and one child is $1 million to $1.5 million on the primary earner, $500,000 on the other parent, both for 30 years. Thirty years because the youngest child will not be independent for 22 years and a mortgage runs 30. Buying 20 to save $8 a month and then re-applying at 50 is the most expensive mistake in term life.

If the number feels high, split it: $1 million for 30 years plus $500,000 for 20 years is about 15% cheaper than $1.5 million for 30, and the shorter policy falls off when the mortgage and college years end.

Applying while pregnant

Most carriers will underwrite a pregnant applicant, but with caveats. Weight gain and gestational diabetes can affect the health class; some carriers postpone applications in the third trimester or after complications. The clean path is to apply before pregnancy or in the first trimester. If you are further along, no-exam carriers that decide on questionnaire data rather than labs (Ethos, Haven Simple) are usually the smoother route; a traditional carrier can be revisited after delivery, and a convertible or replaceable policy makes that easy.

Fathers: there is no pregnancy exception for you. Apply now.

Naming a minor as beneficiary

Do not name the baby directly. Insurers will not pay a minor, so the money goes to a court-supervised guardianship with annual accounting until the child turns 18, at which point they receive the full amount at once. Instead:

• Name your spouse as primary and a trust for the child as contingent. A simple revocable living trust or a testamentary trust in your will does this and lets you set the age of distribution (25 or 30 is common).
• If a trust is not set up yet, name a trusted adult as custodian under the Uniform Transfers to Minors Act (UTMA) as contingent beneficiary. The custodian manages the money until 18–21 depending on state.
• Fabric includes a free will tool that handles the guardian and trust language; worth it even if you buy the policy elsewhere.

Carriers that fit new parents

Questions

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