Our third article in the What to Expect Financially When You’re Expecting series centers around important things to consider surrounding two of your most important insurance coverages i.e. health insurance and life insurance. As is often the case, there are other insurance coverages that are important in this overall discussion, but health and life are two of the most important and the ones that you should spend time looking into as you await your new baby.
Deductibles and Co-Pays When You’re Expecting a New Child
First, regarding health insurance, it is important to know all of the various policy details i.e. deductibles, any co-pay percentages that would be applicable, and how to determine which doctors are in-network in your health plan, just to name a few. Since you will likely be having multiple doctor’s visits before, during, and after the birth of your child, it is important to know how flexible your health plan is regarding which doctors would be in-network. It is possible that you may want to go to a particular doctor for postpartum exams that are different from your other doctors during the early stages of pregnancy and knowing how to find out if this doctor is in your network is important.
Cash Reserves for the Unexpected When You’re Expecting
Secondly, it would be wise to have some cash set aside for any additional expenses and any out of pocket costs that may arise due to additional doctor visits. If you already have your full emergency fund, we would recommend working to save an additional amount that could be up to half of your typical emergency fund. This will be helpful for these out-of-pocket expenses and will allow you to add an additional “buffer” between you and other surprise expenses that may come up during this unique time.
Update Your Policy in Advance of Your Child’s Birth
Third, make sure to notify your health insurance company of your new child and add them to your policy. This is very important because health insurance companies generally require notification within 30 days of birth. This is easily forgotten and the insurance company will not be proactively reaching out regarding this notice. You have to let them know.
Life Insurance is not just recommended it should be required
Transitioning to life insurance, the main focus here is to spend ample time assessing any additional coverage you may need now that your family has grown and if more insurance is necessary, what kind of insurance is the best to get given the current need.
How Much Life Insurance do You Need?
First, regarding how much insurance to get, there is no end to the different methods of how you can determine this amount. Also, it is worth noting that some people really like insurance and will tend to err on having too much coverage and others will be the exact opposite. It’s worth knowing where you stand on this before you approach any sort of discussion on how much insurance is applicable. Some of the factors that you will want to consider will be: should both spouses get insurance policies or only one? What debts would you prefer to have paid off in the case that one spouse dies? Would you like to consider college savings in the calculation? etc. As you can see, there are many questions that determine how much additional coverage may be needed and the answer is very much unique to each family.
Do Both Spouses Need to Up Their Coverage?
Secondly, if after the above analysis you decide that one or both spouses need additional insurance, the next question is where to add this insurance and what kind? Regarding your options for where to add additional coverage, you may be able to add additional coverage through your workplace. This could potentially be more convenient, but the downside is that if you change jobs, you may have to forfeit this coverage. The other option is to get coverage independently through an insurance company, insurance broker, etc. The advantage here is that it is not dependent on your current job in the same way as the previous example. One potential downside, though, is that the underwriting may be more stringent.
Term or Whole?
As to the type of life insurance, we generally recommend buying term insurance. The essence of this type of coverage is that it covers you for a specific period of time that you need coverage the most and it is generally very affordable, especially compared to the dollar amount of coverage on the policy. While there are, to be sure, some instances where a whole life insurance policy (permanent insurance) is appropriate, we typically encourage and recommend term coverage over whole life coverage.
In our next installment of the series, we will discuss savings goals and college savings plans.
If you would like help regarding your financial plan and preparing for your new financial journey as a parent please reach out to Accruent Wealth Advisors for a complimentary consultation. Please call (336) 760-4829 or email us at firstname.lastname@example.org. You can click here to schedule your consultation today.