Life Insurance Needs When Having A Baby

If you're having a baby, your goal is to live as long as possible to help your child become a productive member of society. Therefore, life insurance is a must when having a baby!

It's rational to start eating healthier, exercising more, and building great wealth. But for some reason, we're not a very healthy nation. Roughly 70% of the American population is overweight or obese. Neither are we disciplined savers with the average savings rate at less than 8%.

Perhaps we can blame subsidized healthcare that doesn't reward good behavior as the reason we adopt the “ah, screw it give me another cookie” mentality. If the government said I'd save or make $10,000 a year if I was 10 pounds lighter, you better believe your buns of steel I'm going to be 10 pounds lighter!

Or maybe we can blame food and beverage companies who knowingly peddle poison to keep society addicted to their products. Excess sugar is undoubtedly one of the main killers in the world. Yet, we continue to get bombarded with processed foods. 

I, for one, am not having it anymore now that I'm a father. No longer will I selfishly stuff my face with baklava after 8pm. No longer will I spend hours sitting on the couch trying to pound out a post while watching sports. My son is depending on me!

In this post, let's go through the importance of life insurance when having a baby. We'll discuss how much life insurance you should get, what type of life insurance you should consider, and the best way to get life insurance.

Life Insurance When Having A Baby

The worst thing that can happen to a parent is dying without seeing their baby grow up. It pains me to think there's a chance I won't be around to hustle for my child once I'm gone. Nobody is going to work harder than me to provide for my family, just like nobody is going to care as much about your finances than you.

Hence, the only way to ensure that my wife and child are taken care of is to create a passive income generating machine that will cover their living costs indefinitely. My wife is the beneficiary of all my assets if I were to pass prematurely. I've created a will that clearly states my intentions. Further, I plan to create a trust when the time comes.

But what if you aren't able to generate enough passive income to provide for your family before you die? Heck, it took me 13 years to generate enough passive income to dare leave full-time work for entrepreneurship. The shortcut way is to get life insurance to pay out to your spouse, partner, or close relative who has the directive to take care of your baby.

There are very few examples where you can simply buy your way to financial freedom. Generally, society encourages us all to get good grades, go to a good school, get a great job, work hard for many years, save as much as possible, and invest prudently to one day be financially independent.

With life insurance, you can't buy your way to financial freedom, but at least you can buy your loved one's way and set them up so that they won't have to worry about their finances. If you are going to die anyway, you might as well make a positive out of it.

Questions To Ask Before Getting Life Insurance

Here are some basic questions you should consider before getting life insurance.

Question: Would I want life insurance to help pay off my mortgage(s) so my surviving spouse won't have to worry about housing expenses?

My answer: Absolutely. After paying off one mortgage in 2015, I've still got two mortgages left to pay off (one primary, and one vacation rentals). Two of the mortgages are with properties that generate a positive cash flow, but I don't want to count on my tenants being there and paying on time forever.

You can get mortgage protection life insurance, but it's expensive. It's much better to get an affordable term life insurance policy instead. I decided to get a $1 million term life insurance policy in order to cover all my mortgage debt if I were to pass.

Question: What other debts (car loans, lines of credit, revolving credit card, student loans, etc) could life insurance help pay off to make my family's living situation more secure if I were gone?

My answer: I've got no other debts. I paid off both our student debts a while ago. Revolving credit card debt is the worst due to their egregious interest rates. 

Question: Could I use life insurance benefits to cover my child's college expenses if I passed away?

My answer: Definitely yes. It's not just college expenses I've got to worry about, it's grade school tuition as well. Right now I'm coaching tennis at a private high school where the total cost is $48,000 a year.

Private elementary and middle school tuition is roughly $15,000 – $35,000 a year in San Francisco and Honolulu. Therefore, I've got to consider paying potentially $500,000 in grade school tuition + $300,000 in college tuition in 3 – 21 years. 

Question: What is the gap in living expenses if my family had to just live off one spouse's income?

My answer: My wife doesn't have a day job. She retired February 2015 and has been busy being a full-time mom to our now two children. We spend $2,350 a month on healthcare alone because we earn too much to get any subsidies.

Further, I haven't had a full-time job since 2012.Thankfully, our passive income is generating about $250,000 a year in 2020 and we live on less. Therefore, if either one of us dies, we should be fine. That said, it's still nice to have life insurance to cover our liabilities.

I absolutely don't want my wife to have to get a day job if she's taking care of a young child. She can only if she wants to. The goal of insurance is to provide maximum options and minimal disruption. 

Please also go through these questions with your partner.

Term Life Insurance Coverage Needs

Term life insurance is the best choice for the vast majority of families. It’s cheaper than permanent life insurance and does its job with maximum efficiency.

Permanent life insurance can be considered, but only if you have a lifelong dependent (e.g. special needs child) and/or plan to bust through the estate tax (death tax) limit of $11.58 million per individual or double that per couple for 2020.

A spouse does not have to pay estate taxes on money inherited from the deceased spouse. In other words, permanent life insurance can be used as an estate planning tool.

Based on the answers I've given above, I need at minimum:

  • $1 million term policy to pay off all mortgages and cover all tuition costs from pre-K through college
  • 20 – 25 year term policy to last until one child gets through college. I'm sure I will be able to pay off all mortgage debt in 20 years.

I've basically decided that equating the amount of life insurance I need with my debt and potential tuition costs is enough due to my existing income streams.

However, if you do not have enough passive income, then you should decide how many years of income you’d like a life insurance policy to replace e.g. $100,000 income X 10 years = $1 million policy.

Please realize that there are many different life insurance options to choose from. It is wise to be familiar with all of them. Although term life insurance is good for most, there are other great options to choose from.

In retrospect, I should have gotten a variable universal or index universal life insurance policy back in 2010. If I did, I could have grown more wealth through the cash value portion of the life insurance since the stock market has been so strong.

Naming Beneficiaries

When you buy a policy, you name a beneficiary, such as your spouse, to receive the life insurance money. You should go down the list of people you trust and name them all in order.

My primary beneficiary is my wife, then my father, then my mother, then my sister. In some cases you can provide a predetermined split of proceeds to multiple beneficiaries e.g. 50% to wife, 20% to father, 20% to mother, 10% to sister. Just check with your provider.

It's important NOT to name your baby as a beneficiary, even if you want the money to benefit them. If the beneficiary is a minor when you die, the life insurance company can’t pay the benefit until the court appoints a guardian. Hopefully, the court appoints the right guardian per your wishes, but you don't want to trust a third party to do something if you don't have to.

Instead, one option is to set up a life insurance trust to hold money and property for your children and name the trust as the beneficiary. You appoint a trustee, such as your spouse or another adult, to manage the trust according to your instructions.

An attorney can help you set up a trust, and the life insurance company can tell you how to word the beneficiary designation. Here are the three recommendations my estate planning lawyer told me everyone should do.

Get Life Insurance As Soon As You Know You're Having A Baby

Having a baby is going to be a life changing event. Between months of no sleep, diaper changing, and doctors visits, you want to make sure all your financial ducks are in order before your little one arrives. 

I'd get life insurance coverage as early as the third trimester (start of the 28th week of pregnancy) and no later than after birth. Why risk it?

As a recap, here are some determining factors for life insurance premiums:

  • Age: The younger you are the less you pay.
  • Sex: Women generally pay less than men.
  • Health: The healthier you are the less you pay.
  • Smoking habits: Smokers pay more than nonsmokers.
  • Hobbies: People with risky hobbies, such as scuba divers, pay more for coverage.
  • Education: With the fintech movement, generally the more education you have the less you pay.
  • Field of work: Fintech companies are looking for longevity and well-paying fields.

If you're having a baby or are trying to have a baby, congratulations and best of luck! I know full well how difficult it is to conceive, especially as we get older.

Having life insurance when having a baby is all about being a responsible parent who will continue to be a guardian no matter what happens. I'd love to hear from parents or couples trying to conceive how you planned for the financial care of your child.

Life Insurance Recommendation

The most efficient way to get competitive life insurance quotes after having a baby is to check online for free with PolicyGenius. They are the #1 life insurance marketplace where qualified lenders compete for your business.

It's much easier to apply on PolicyGenius than go to each carrier one-by-one to get a quote. I've known the founders for years and they have truly built a fantastic resource for individuals and small business owners.

When we had our second child, my wife used PolicyGenius to get more life insurance coverage for less money than she was paying before. Talk about a win, win.

Life insurance is an act of love. Please get life insurance to protect your family. Explore free quotes on PolicyGenius today.

About The Author

52 thoughts on “Life Insurance Needs When Having A Baby”

  1. I’m currently covered through my employer right now for 3x my salary which, admittedly, still isn’t much. All it would really do is provide a buffer for my family to settle into life without me.

    However, as I plan my exit from my day job to my 1099, I’ve started recently shopping plans. I lose my employer plan as soon as I leave and want to have one already in place. Never know!

  2. Save Splurge Deny Debt - Cameron

    Great post as always. I have a 20 year term policy that will cover everything for my wife and child if I happen to pass away.

    It is tough to think of not being there for a child, but getting life insurance early allows you to move on to the more fun stuff!

    I am glad the theme of this year is family finance. I am a new dad and it is absolutely the best thing. #dadlife for the win!

  3. 48 y/o physician (OBGYN ‍⚕️) and mother of 4 here :)

    Husband and I started our family while I was a resident; knew all too well the frustrations infertility patients endure and decided not to wait…did not expect the the frenzy of 911 or the global financial crisis to follow.

    I started a solo private practice that allowed me the control and flexibility to be mommy virtually uninterrupted, but then my husband lost a series of jobs as the manufacturing industry in this country dried up. Cushion, savings, retirement gone.

    Had purchased a whole life policy and disability policy at age 29, just before children. Found the whole life premiums far too costly to maintain once kids, their activities, nannies, preschool, LIFE became much more expensive. Dropped the whole life and replaced it with term; kept the disability policy because the hospital policy offered to me as a resident was not portable and, did not cover “accidents of pregnancy,” or blood-borne infections due to needle-sticks (quite ironic, given my line of work).

    I still have same disability policy now, and definitely needed it as a self-employed MD. I also gathered up more individual term along the way, totaling $2.5 M. Started a 401k with match for myself and employees – fees for my small business were staggering, but tax benefits were helpful.

    A little over a year ago, sold my practice and work now for a hospital-owned practice. Rolled my 401k over, have 2.5 my salary in LI + 60% of income DI, free as an employee. So, what to do with my individual policies? I’m inclined to reduce the DI and keep the LI for now…we have no passive income, very little savings, owe $675k on home.

    Kids are much older, college is coming, husband and I are just now beginning to see clear to get back to aggressive saving and investing.

    Whew! And, life is good. I wouldn’t trade motherhood, my journey, or the balance it takes to do what I do for the world. Next aspiration: transfer of wealth to my loved ones and a legacy of giving back.

    Open to suggestions and medical questions

    1. I would strongly advise against reducing your individual DI policy. Your employer paid policy is taxable if you become disabled. Therefore your 60% earnings is not net after taxes. Secondly, if you become disabled, your disability benefits are “coordinated” with your social security disability benefits. As an example, say your employer DI pays you 10k per month and social security pays you 4k per month. The DI policy is reduced by the amount you earn from social security so you are only totaling 10k not 14k.

      If you become disabled are your expenses going to increase or decrease? They certainly are not going to decrease. Your individual DI policy is paid tax free and the benefits are not coordinated with social security. This means you get the full pay out. If you had a good insurance advisor the policy would pay to age 65 or age 67, you would have automatic increase based on the consumer price increase, and you would have the ability to increase the benefit amount based on increased earnings without additional proof of insurability.

      You just stated that you have little savings and owe 675k on a home. Who is going to support your kids and pay for their education if you drop your individual DI and were to become disabled?

      Your friendly “Insurance Advisor” – not insurance salesman

  4. I don’t intend to have children, but I am planning on marrying my girlfriend once she’s ready. I want us to have our beneficiaries be her brother on disability and her two nephews. I’ve not broached this topic with her yet (not appropriate until we are engaged), but I worry about them so much and don’t think their families will provide enough to keep them safe.

  5. Great post about the importance and coverage of life insurance. I have life insurance through work, so went for 30 year 500k supplemental life insurance to make sure I’m covered, if I leave my company.
    One other thing to consider is instead of on big 30yr policy to stagger multiple policies, ex: 500k 10yr + 500k 20yr + 1M 30yr, that way your total payments are low and as your policies start expiring you would have accumulated more assets, less debt, and would not need as much coverage.

  6. Theofficialjohnandre

    My son is due next mnth and I don’t plan on going crazy, $250-500k plus social security. My wife will have to go back to work or remarry. Builds character.

  7. I got a 15 year term life policy for $1 mil through SOFI / Protective for I think $27.95/month (mid 30s male with no historical issues) a couple months ago. Great deal!

  8. Always a good reminder. We have 1 son but are expecting twins this august (helllooooo anixety!!) so are re-evaluating our life insurance needs.

    Premiums seem to have gone down so we will be able to replace our $1.5M policies that expire in 2034 with $2M policies that expire in 2037 for about 15% additional premium.

    Of course I hope we never need it, but i guess thats the point of insurance in general – you hope you dont need it, but are glad you have it if the worst were to occur.

    Went w/ $2M based on 3 children in public school who i hope to send to a top private college, $775k left on our mortgage and a nice buffer to allow my family to not have to worry too much about money.

  9. As a young father I’ve started looking into this topic too. Turns out I’m heavily under insured and should address this sooner rather than later. I have some shopping to do :-).

    Will also take into account regulation concerning beneficiaries.

    Many thanks for the post.

  10. Bear in mind that if you die, certain expenses you incur go away as well. In the needs analysis I have encountered many who hadn’t thought of this. If the husband has the expensive hobbies (like fast cars or, like me, playing horrible golf), then the remaining family could see a substantial drop in spending need.

    Life insurance is the one area where no cookie cutter solution will work. It really dependent upon a family’s particular situation.

  11. Great review! At my peak, I had about $2.5m on life insurance and my wife had $1m. All term. Today, we each have $500K through the AICPA which is a term policy that refunds with dividends every year. In short, this makes our premiums about 50% less expensive than in the standard commercial market. The dividend is not guaranteed. If a lot of accountants start dropping dead, then the full rate would apply. In 15 years that hasn’t happened.

    When your kids are young and debt is high, then the need is high. Even in retirement or if you have a ton of wealth it is a uesful vehicle for estate liquidity. Some use ILITs to avoid estate tax altogether.

    I appreciate Sam mentioning that you should not make a child the beneficiary of a policy. Also, don’t own your own policy. Own your wife’s and she should own yours.

  12. Living in Europe, the risk you want to cover is here covered by government and Company retirements plans. If I would die, my wife would receive payments that would more than cover our current living expenses. So she and the kids would be financially fine.

    But there is annother risk that is often ignored: If anything would happen to my wife, I would need daycare for many years. Daycare around here runs about 30,000 a year. So if you want to cover everything, you should also buy life insurance for your wife.

  13. Great article. Great to see a thoughtful write up about protecting family and assets. I always recommend my clients get 10X their salary in term life insurance. The goal would be to become self insured through paying off debt, once the kids have gone through or are almost finished with college, you could have a paid for home leaving little need remaining for any insurance. With smart investments over the same period of time, no payments, you can realistically leave the life insurance behind. Term is certainly better than any whole life or permanent life policy for this reason among the laundry list of others.

  14. Mortgage, tuition, daycare, private school and 10 years of salary? I want my wife to still be sad and not feel like she won the lottery if I kick it a little early.

    We have a six-month-old (man time flys) and both of us work but we live off one salary and save the other. We have agreed it really isn’t worth the roughly $150 a month for both of us to get two million in life insurance. We are instead putting that money into a 529 plan to save for college. We both have enough life insurance to pay off the house and supplement about two years of salary.

    You have got me thinking though so I think I will at least get some quotes again and make sure we are still comfortable with our current plan.

  15. Understanding Disability insurance is a bit of a different vehicle, any advice for how much DI to purchase if I already have significant savings. Savings is up to about 15x annual expenses. 35 yo in excellent health.

    1. Check out group benefits through work first. Outside of work the following applies: if you’re healthy its cheaper, if you don’t smoke its cheaper, if you work in an office environment, its cheaper, if you are on salary vs commission its cheaper. You can get a max of 70-80% of your monthly income as a benefit. Usually 60% monthly benefit is good, just keep in mind that most people don’t see their expenses drop when disabled, dr visits, pt, medication, etc. Just a few thoughts.

  16. Very thorough. I recently went through this when my daughter was born and I wish this post had existed then. I learned something new here about not naming your baby as a beneficiary. I’ll be making changes tomorrow, thanks Sam!

  17. I carry life insurance through work, my coverage is $1M, but only as long as I keep working there. This isn’t a problem since my wife also works, and earns enough to maintain our current lifestyle, with enough left over to act as a small buffer. If anything happened to me, my wife could liquidate all our assets, and with the $1M insurance pay-out, she would have about $2.5M to live off of, while taking care of our daughter. She even has the choice to quit her job, although I doubt she would do so, since our daughter would be in school most of the day. Once I go into early retirement mode, I’ll likely self-insure. My family is already luckier than >5% of the world population, with a financial foundation that’s much stronger than what I started with.

  18. Dream2Retire

    The Dreamers are setup if I kick the bucket. My work also has the 6x your salary and my wife said she would just re-marry for money, lol. P.S. the next Dreamer is due this week!! Wish us luck :)

  19. Great things to think about. I think there should be a couple more questions about general plans if the worst case happens.

    Would moving in with the parents be better than raising the kids alone? Or nearby? Is that a lower cost of living?

    What can we afford now? If life insurance makes our life worse 99% of the time, how much are we willing to sacrifice for a 1% chance?

    What cuts would be ok in the worst case scenario? No private school? No college tuition?

    To sum up my general thoughts – make the worst case scenario a little better with life insurance, but you don’t necessarily need a policy to cover your complete working income.

  20. Mr. BITA and I both have life insurance through work, but more than what they offer for “free”. We could buy the extra pretty cheap, without having to go see a doctor. We bought enough such that if either one of us dies, the other would instantly be catapulted to our FI “magic number”. That is the number at which we plan to retire and live off the SWR, and we plan to have life insurance that gets us to that number until the time that our stash grows to that number.

    In addition to that we (partially) superfunded a 529 for our daughter.

  21. I would even go so far as to say get term life even if you aren’t planning on having a kid soon. Your health is a big factor in the expense, so the younger you are when you get it, the more affordable it is. It’s not just a question of getting less healthy as you age – the older you get, the more likely you become to discover you may have some disease that makes life insurance more expensive (for example, diabetes, multiple sclerosis) or unattainable at all (cancer). If you don’t known when you might have a kid, get as long a term as you can – 30 or 40 years.

  22. I have a Term policy plus 1x my pay from work. It is not setup to allow my wife to never work, just long enough for her as an engineer to find a new job and things to settle down. It should cover five years.

    My wife is somewhat under insured with a policy that would cover maybe two years of expenses. I’m struggling with whether I want to do something there as she’s currently a stay at home mom, so the money would more be for child care if something happened.

    Beyond the above there’s enough saved to cover college and other things…

  23. I wasn’t organized enough to get life insurance before I got pregnant (the 2nd time) and then I was diagnosed with a pregnancy complication which had a non trivial mortality rate during child birth. It made it impossible to get life insurance. While I am not the primary breadwinner in my family, I would want my husband to have some financial cushion if I had passed during child birth. Luckily, it all worked out and I’m alive and well and I’m now insured.

    I recommend getting life insurance before you conceive. :-P

  24. Definitely smart to cover your debts. I have staged in more term as my income has risen and when my son came along. I don’t have the passive income yet, so my blend of insurances gets my family debt free and enough left over for a passive income nest egg.

    Another consideration is the social security that comes along if you were to pass early. Definitely helps with the income portion, both for your spouse and for your child up to age 18.

  25. CentralSunsetNeighbor

    Long time lurker but wanted to add a comment on this topic because this post hits close to home as a new father and current life insurance shopper. My wife and I got our blood drawn recently and are going through our options. The insurance salesman explained to us that Term Life policies only pay out in only 2% of cases and it might be worth exploring Whole Life Insurance to supplement. Instead of getting the policy for $2m, he suggested getting a $1.75M/250k Term/Whole Life split. The annual premium is upwards of $7.5k/yr for 10 years for Whole Life, but he sold it as being tax free when it pays out and exempt from disclosure on the FAFSA (college financial aid) application. Any opinions on Whole Life insurance?

    1. I’m not an expert on life insurance by a long shot, but here are a couple of thoughts and a couple of questions. First, as a new father, don’t you want your term policy to be active for more than 10 years? Second, who cares that term policies only pay out 2% of the time? insurance is the one expense that you don’t actually want to receive a benefit from. You don’t say your age, but as a new father I’d guess you’re no older than 35. You have a good chance of living 50+ more years. The $250k whole-life payout is pretty paltry, especially as inflation eats it away. I think you’d likely be much better served getting a term policy for 20 or 25 years and invest the difference in premiums. My $1m term policy is $400-and-change per year…If you invest the $7k a year difference from this $7,500-a-year policy, you’ll likely come out way ahead, and be much better insured in your child’s formative years to boot.

      Oh, by the way, let’s say you took that $7,000 a year for 10 years and put it to work at 8%…if you live 50 years, that’s going to grow to over $2.5 million by the time you die a timely death. There’s a whole-life insurance policy for you.

      1. Its probably some sort of universal life policy his adviser is suggesting. Keep in mind that most whole life policies get dividends and therefore grow with and eventually exceed premiums and can pay it for you. The 250k policy will likely be worth many multiples in value 50 yrs from now. I used to sell whole life and see its value but it is a small piece of the puzzle and your advisor was probably right to suggest only 250k and the rest term.

        Lastly my grandfather was a multi millionaire by 40 and basically retired. He just passed away earlier this year and left my grandmother with 175k annual income but about 110k in annual debt payments. His term policy expired three years ago and sure would have been nice to have additional insurance to take care of heel. Now we are fire selling a bunch of their possessions to pay off some of the debt

        Just my two cents.

      2. I couldn’t agree more with Johnathan, he hit almost every point I was going to make. On the taxes statement, Roth/backdoor Roths also pay out tax free to heirs. I would guess the insurance salesman didn’t tell you that after the first 2-3 years your cash value would be $0. So $15-22.5k that he gets mostly as comission. Also typically you don’t get the $250k and your cash value when you pass, only the higher of the two. Bottom line, insurance is supposed to be there when you need it, if you have millions saved/invested, why would you need life insurance anymore? I believe 80% or so of people that buy whole life typically get rid of it at some point because they eventually realize this.

      3. Well for one his insurance needs are 2 million. What happens if he buys the 1 million policy and then invests 7000 per year as you suggest and then dies a year later? He now has 1,007,000 and whatever his 7,000 investment earned. Looks like he is about 993,000 short.

    2. Also, long time reader here (really enjoy your work Sam!), first time commenter. I’m a financial adviser and have yet to have anyone convince me of the benefits to the consumer for non-term life insurance policies i.e. whole life, universal etc. The benefits are for the seller. Namely, the non-term policies pay a much higher commission. Jonathan nailed it on the head 1) I don’t want to be in the 2% that uses the policy 2) invest the delta from the premiums and you’ll be in good shape.

  26. Go Finance Yourself!

    I have a $300k term policy. It’s more than enough to pay off debt, cover funeral costs, and cover multiple years of living expenses if my wife didn’t want to go back to work right away.

    I think that’s one of the biggest considerations when deciding how much insurance. If your spouse dies will you need work as a distraction to get you through the day or will you be too distraught to work? Everyone one is different and it’s why I always laugh when advisors try a one size fits all approach when it comes to insurance.

  27. I’m a bit disappointed that you didn’t mention social security survivor benefits. Also, private schools? 90% of America, myself included, sends their kids to public schools, so most of us do not share these concerns.

    Self insurance is by far the best option, in my opinion. Save your money and invest instead for your family. Both my parents died without life insurance, and I am doing extremely well in spite of it.

    1. Don’t be disappointed. Add value! Please share more your thoughts on the Social Security survivor benefits for partners who are not married (big trend due to marriage penalty tax) and partners who are legally married.

      Can you surviving spouse collect Social Security benefits early? If so, do you think that is enough to cover a typical family’s expenses?

      Finally, when did your parents die and did they leave you anything?

      With regards to private school education, I just want to have the option if that is what is necessary or that is what my wife wants. I went to public school with the majority of Americans as well. Thanks

      1. Yes, you can log into your SS acocunt at, create an account, and view your survivor benefits. These benefits are paid out if one spouse dies until a child is age 18. I don’t have all the details, as I am married it’s a benefit to me.

        Is it enough for my spouse to survive on? That is in the eye of the beholder. If you live in a high cost of living area, possibly not. In the heartland? Probably easily. We estimate our early retirement budget at $5,000/month, and that’s with a lot of fluff in it. My family survivor benefit equates to $4421 per month, according to the website. That equates to a gap of $579 per month. At a 4% withdrawal rate, we only need $173k in total assets to cover this gap, conservatively. We have over five times that amount. (I’m not bragging, just explaining).

        In addition, when one spouse dies, your expenses are certain to decrease, especially if a male dies. While I am in decent shape, I do eat a bit more than my spouse. I use utilities, take up space in our spacious house, and I am certain she would like her 10% back, of the portion of our walk-in closet that I am currently occupying.

        My dad died when I was 17, my mom died in 2015, total received was $2400, in 2016, from an inherited IRA. I am very thankful for that money, but it’s not a game changer by any means.


        1. Wow! $4,421 a month from Social Security is incredible. I had no idea. That’s more than the per capita income in the US. I’ll have to look into this more as I had no idea benefits were so high.

          Sorry to hear about your parents. This post is about life insurance when having a baby / infant. I’m assuming you were over 21 in 2015? I think you said you are 41 right now. If so, you have a stronger fighting chance of survival than that of a minor, let alone a baby.

        2. So the $4421 benefit is about $1473.67 each for your spouse and for your 2 kids right? I believe the spousal benefit will be reduced if he/she works and earns over a certain amount. The children’s benefits will not be affected. There’s also that $255 lump sum payment Social Security gives your survivors upon your death…presumably to help with funeral costs. I think that amount probably hasn’t gone up since the creation of the Social Security program!

    2. Just an FYI – Social security survivor benefits gradually start to phase out once with widowed survivor makes more than $16,900 annually and typically they completely phase out once the widowed survivor makes more than 120k or so. The standard rule is, for every 2 bucks you make over the 16.9k limit, you lose 1 buck in payout. You can still get a decent payout if your income is 20-50k, but it becomes very limited if you make more than that. Dividends and capital gains included. I’ll opt for private insurance, as I will not give the financial safety of my family to the government.

  28. I’ve got 4 kids and went 15 years without having life insurance. Totally irresponsible on my part. Luckily I didn’t pass away during that time, leaving my family high and dry.

    I’m now covered for the amount I think would make me financially independent. That amount of cash would produce enough money each year for my wife and kids to live a better life than they’re living today. I die and life gets better (financially) – that’s the best gift I could give as a husband, father and provider.

  29. For a guy, I think the best time to lock down insurance is before conception or just after. If you need insurance, you should get it as soon as the kid is on the way – if you die during the first trimester, the kid’ll still arrive without you.

  30. Typical work-offered life insurance here in the Silicon Valley is 2x your salary. A nice bit, but not nearly enough if you have kids and a mortgage.

    We’re currently at $750K term, but should we add some rental property, I’d want to increase it to cover any mortgages there too.

    The most important thing is to get it. The last thing any of your survivors need to worry about after you’re gone is how they’re going to keep a roof over their head and food on the table!

  31. You forgot to mention those of us regular folks who have some life insurance through work.
    Definitely much less expensive.
    I did just recently get a 20 year $500,000 policy (which is in addition to insurance through work), now that I have a kid.

    1. Good call. I remember getting life insurance through work as well, but it was based off a multiple like 2 to 5 times your salary, which I didn’t find enough at the time. So I got more insurance to supplement it.

      1. Many companies offer life insurance tied to salary as well as additional, optional coverage in which employees can select specific amounts and have it taken out directly from their check.

        For those that do rely upon company life insurance, it is essential to review the contract and determine if the coverage is “portable.” If portable, an employee can continue coverage even if they leave the company. Many individuals find that their coverage isn’t portable upon leaving the employer and are then in a position (at an older age) where buying term no longer easily fits into their budget.

        1. Great point about “portable” insurance from your employer. If it isn’t portable and you get ill and can no longer work, you’ll lose the insurance…being ill, it will be difficult to obtain reasonably priced insurance! So disconnect your insurance from your job.

          Many years ago, I learned that life insurance thru my employer was indexed to my age. As I got older, my premiums increased. I switched to a level premium term policy.

  32. Your need drastically decreases as your child gets older. You may want to consider 2 polices. 1 at 1M for 10-15 years and 1 at 1M for 15-25 years. This way you have 2M in coverage as the need is higher and it will drop to 1M when your child is older with less education expense ahead. Much less expensive and covers your needs. You can play around with the numbers and terms, but you get my point.

  33. I have had term life insurance since getting out of school. My wife was a student and unlikely to make the Doctor salary I pull. It has always been $2 million until the age of 65 years.

    Once I had a baby, I added my works term life insurance for another $1.2 million. This will cover our home (still have a mortgage). My school loans evaporate if I die so I won’t worry about them in the equation.

    I also took another $500 K term life for my wife. I imagine if she dies I will become the primary care giver to my son. I will likely take a month or two off to mourn and adjust to the new pattern of life. Then I will likely work part time. With $500K I can easily pay off my school debt and a years salary.

    Regarding wills versus trusts. When we had a son we made a will. When we moved to California I made a trust. I placed my home and other assets in that trust for safe keeping. I determined guardians for my son in case my wife and I both die. As more assets come into the fold, I can just add them to the trust.

    The other benefit of the trust is I can dictate how much money and when my son gets it. I do not want him to get $3 million at the age of 18. I also dictate how the money can be used by his guardians until he is an adult (school, sports, etc…not a fancy car at the age oif 16).

    I wrote about setting up a living trust on my site and another posts on assets to include in the trust. Check it out if you want.

    As always, great post Sam!

  34. I’m glad I got term life insurance soon after I left my day job because it’d simply be more expensive for me to get a policy now and I sleep better at night knowing my family is protected. I definitely took my old day job’s “free” life insurance benefits for granted when I had them. I was also younger and in less need of them, but I really appreciate how good my benefits package was. My former employer covered the entire premiums for our life insurance benefits the entire time I was there and 100% of our medical insurance premiums for about 8 of the 10 years I was there too.

    It’s certainly not fun to think about mortality as we get older, but it’s foolish not to plan and protect our families should the worst happen.

    Good to know about the possible negatives of naming one’s minor child as a beneficiary on a life insurance policy. I never thought about the complications that could arise with guardianship. Another good reminder to have as many legal docs sorted out in advance as possible, especially for those with kids when it comes to who’d care for them if both parents died, setting up a trust, getting wills in order, etc.

  35. Good call Sam. If you are a women, I have read that life insurance can be difficult to get during the second trimester and after. If you plan on being a mother and a breadwinner, prior planning is extra important. Plus, who wants MORE doctors appointments once you get pregnant.

  36. I got a term life policy when we had a kid too, but not a huge one. Just $250,000. I probably should beef it up to at least $500,000.
    Your cost of living is higher so you need a bigger policy. $2 million sounds about right. Private schools are expensive!

Leave a Comment

Your email address will not be published. Required fields are marked *