Everyone knows that having a baby will change your life. Caroline and I have just celebrated our son, Kynan’s, first birthday and like most new parents, we researched baby purchases and were prepared for sleepless nights (which we duly experienced!) and the demands of caring for someone so entirely dependent. It is a time of complete upheaval and there are many things that you just cannot plan for or fully appreciate until you bring your little one home from the hospital.
New parents often express that the total dependence of a baby and the sense of responsibility felt for this new little person can be overwhelming. You’ve bought someone into the world and they are entirely reliant on you as their parents. Thankfully, there are some practical steps you can take to ensure that the care and lifestyle you have planned for your new son or daughter will not be compromised by financial concerns should you or your partner fall ill, or tragically, pass away.
In the lead up to the birth of a child, many couples will review their work situation, housing and budget. It makes good sense that insurance for new parents such as life insurance, income protection and trauma insurance also be reviewed as you make the transition from a couple to a family. We know firsthand that becoming a family brings new financial pressures, particularly if one parent is taking time out of the workforce to care for the newest family member. The transition from two salaries to one can in itself be a challenge, so take a moment to consider how you would manage should the parent working outside of the home be unable to earn a salary due to accident or illness, or even worse, death.
So how much personal insurance do new parents need?
This will of course depend on your personal situation and the lifestyle that you wish to protect. The usual rule is to provide cover for 10 times your yearly earnings although this can be increased depending on the number of children you plan to have and other circumstances. For most new parents it is appropriate to consider insurance to cover the following expenses:
- Home Loan– Mortgage repayments are the main expense of most households and any insurance you take out should be adequate to cover principal and interest payments.
- Childcare – If one partner becomes ill or passes away, will you be able to afford child care expenses in the likely scenario that one partner is required to work?
- Education – The cost of uniforms, school excursions, books and camps certainly adds up. If you choose to send your children to a private school you can expect to pay many hundreds of thousands of dollars over their schooling life. There is no doubt that the death or serious illness of a parent would be incredibly stressful on a child and to change their school would only compound this trauma.
- Other costs – From food and nappies to rates and electricity bills, there are numerous goods and services that will still need to be paid for in the event of a death to help the family maintain its current lifestyle.
As new parents ourselves, we know the joy and the challenges that a new baby brings. We also know what is a very exciting time is also a time of great financial and personal upheaval.
Although it seems that part of the job description of new parents is to worry, whether it be about their safety, sleep routine or health, with adequate personal insurance coverage you can be assured that it won’t be your family’s financial future keeping you awake at night.