Protecting Your Family With Life Insurance

Carrie Schwab-Pomerantz on

Dear Carrie: My partner and I recently had our first child and are trying to get our finances in order. We met with an attorney to put together a will, and she mentioned that we might need life insurance. I do have a policy through work, but now that I'm a new dad, I don't know if it's enough. Can you advise me on how much I need and the best type? -- A Reader

Dear Reader: Congratulations on being a new dad! I'm sure you have a lot on your mind, so I'm gratified to hear that you're thinking about your finances at this important time in your life. And I'm especially glad to hear that your attorney brought up life insurance.

Insurance is designed to help you cover an unlikely event that could be financially catastrophic. In the case of life insurance, you're protecting your dependents from the loss of your future earnings. For example, a life insurance policy can pay your mortgage, college tuition or even funeral costs so your surviving dependents will be able to continue on with their goals and maintain their lifestyle.

Anyone like yourself who has someone counting on them for their financial welfare will likely need life insurance. Young families in particular have more debts and fewer financial assets, so life insurance is often critically important. Retirees with no debts and enough savings, on the other hand, may not need life insurance at all.

And it's not just the breadwinner that may need life insurance. While a stay-at-home parent or full-time homemaker may not bring in a paycheck, they provide innumerable services (for free!) that would cost thousands of dollars to replace.

Life Insurance Needs Evolve With Time


Some families only need life insurance until the kids finish college and the mortgage is paid. Other families, for example those with a special needs child, may need insurance for a lifetime.

It's important to understand that your life insurance needs will change over time. Make sure to review your coverage with any major life event like moving, the addition of a new family member, changing jobs or buying a new home.

Zeroing in on the Amount of Insurance You Need

One of your first decisions is how much life insurance you need. An aggressive salesperson might try to sell you more than you need, so it's smart to begin your process with what is generally referred to as a "needs-based" analysis.


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