Have you or a loved one recently had a baby or adopted a child? A growing family, by definition, means growing financial obligations – both present and in the future. Raising children can increase your insurance needs and heightens the urgency for being prepared.
Each time you experience a major change in your family – from marriage to a new child, purchasing a new home, changing jobs, or your child starting to drive – reevaluate your insurance policies to make sure you are adequately protected.
With children, the amount of future financial obligations increases. The cost of raising children and funding their college education can be expensive. Should one of the spouses die, the loss of income might severely limit the future quality of life for your surviving children and spouse.
Not only does death eliminate the future income of one spouse permanently, but the future earning power of the surviving spouse might be diminished as single parenthood may necessitate fewer working hours and turning down promotions. The amount of life insurance coverage needed to fund this potential financial loss is predicated on, among other factors, lifestyle, debts, age and number of children, and anticipated future college expenses.
Some couples decide to have one parent stay at home to care for the children full time. The economic value of the stay-at-home parent is frequently overlooked. Should the stay-at-home parent die, the surviving parent would likely need to pay for a range of household and child-care services and potentially suffer the loss of future income due to the demands of single parenthood.
When a child becomes a new driver, one choice is to add the teenager to the parents’ policy. You may want to discuss with your auto insurer ways to reduce the additional premium that accompanies a new driver. You may want to consider an umbrella liability policy as well. This policy covers you after underlying auto limits have been exhausted.
You should review your homeowners insurance when you have new household members or you purchase a larger home to accommodate your growing family.
A growing family generally accumulates increasing amounts of personal belongings. Think of each child’s toys, clothes, electronic equipment, etc. Moreover, household income tends to rise during this time, which means that jewelry, art, and other valuables may be among your growing personal assets.
With growing assets, you may want to increase liability coverage, or if you do not have an umbrella policy, consider adding it now. Liability insurance is designed to help protect against the financial risk of personal liability. For example, if a house guest is badly hurt on the trampoline in your backyard.
With your first child, be sure to change your health care coverage to a family plan. If you and your spouse have retained separate plans, you may want to evaluate which plan has a better cost-benefit profile. Think about whether now is the appropriate time to consolidate coverage into one plan.
If your family is likely to suffer economically because of the loss of one spouse’s income, then disability insurance serves an important role in replacing income that may allow you to meet living expenses without depleting savings.
If you already have disability insurance, consider increasing the income replacement benefit since your income and standard of living may now be higher than when you bought the policy.
Have a conversation with your financial advisor and your insurance agent whenever you have life changing events that affect your household.
Have a conversation with your financial advisor and your insurance agent whenever you have life changing events that affect your household. These changes could include a new child, a larger home, a higher income, one parent deciding to stay home, or a new driver.
Do you need help identifying risks that might impact your family? Have you evaluated and quantified the risks to your financial well being? Are you certain your risks have been adequately transferred with insurance?
If you have more than $2 million saved and need help from a wealth manager, the Peak Wealth Planning team can assist.
Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future.
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About the Author
Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.
Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, esop diversification, retirement income, insurance, and estate planning advice. Peak Wealth Planning is a fee-based financial advisor based in Champaign, Illinois, and Fraser, Colorado.