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Expecting A Baby? How To Choose A Life Insurance Policy

Updated: February 2020

Have a baby on the way? Then you've likely spent the past several months preparing to welcome your bundle of joy into the world. In addition to decorating the nursery, stocking up on diapers and planning your parental leave, you may want to add "buy life insurance" to your pre-baby to-do list.

A life insurance policy can help ensure a secure financial future for your growing family. If you or your partner were to pass away, the benefits could be used to help replace income, pay off debt, cover living expenses or pay for your child's future college expenses.

But, what type of life insurance policy may be a good fit for your family? Here are some questions you may want to ask yourself.

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How Much Life Insurance Does My Family Need?

Every family's insurance needs are unique, so it may help to start by using a life insurance calculator to determine how much coverage you may need.

You may want to consider your family's immediate and future financial needs when choosing life insurance coverage. Here are some things you may want to keep in mind:

  • If you have a mortgage, how much do you owe?
  • What other debts (such as car loans, lines of credit, etc.) does your family have?
  • Do you want to help pay for your child's college tuition one day?
  • Would a surviving spouse be able to work after you pass away to help cover expenses?

Ultimately, you may want to work with a life insurance agent to determine how much coverage may be enough. An agent can help you choose a coverage limit based on your current assets, future needs, financial priorities and more.

What Type Of Life Insurance Can I Afford?

There are two main types of life insurance to choose from: term life insurance and permanent life insurance. Your family's financial situation can help determine both the type of policy you need and the optimal length of your policy.

Term Life Insurance
If you want your policy to be in place for a set period of time — for example, until your child finishes college or a 30-year mortgage is paid off — you may want to consider term life insurance. A term life policy provides coverage for a specific amount of time (typically between one to 30 years).

Term Iife insurance may also be a good choice if you're young and concerned about whether you can afford life insurance both now and down the road. Life insurance premiums (the amount you pay to keep a policy in force) are based in part on your age and health at the time you purchase the policy, says the Insurance Information Institute (III). And, depending on the policy's terms, the premium may remain the same during the entire policy term period.

Permanent Life Insurance
If you want life insurance coverage that lasts a lifetime, permanent life insurance may be an option. You'll typically pay higher monthly premiums because this type of insurance offers protection for your entire life, as long as premiums are paid. This means the policy's benefit would be paid out to your beneficiaries no matter when you pass away.

Permanent life insurance policies also typically include a savings component, called "cash value," which may contribute to the higher premium, says III. But, in addition to the death benefit, this means your policy will accumulate cash savings that you may be able to access while you are alive1.

Is My Employer's Life Insurance Plan Enough?

Your employer may already offer life insurance to you as a benefit. However, it may be a good idea to purchase additional insurance on your own for a few reasons.

First, your work-provided life insurance may not offer sufficient coverage for your family's financial situation. If you have a spouse or kids, Investopedia recommends having coverage worth five to eight times your annual salary. It's a good idea to check the coverage limits on an employer-provided policy and see if you can increase the death benefit.

Additionally, when you purchase your own life policy, coverage isn't dependent on your employment situation. In other words, you can take the policy with you if you change jobs.

As you plan for your growing family's immediate needs, take time to plan for their future needs, too. Life insurance is a way to help make sure your loved ones are taken care of even if you pass away. If you have any questions or need help determining what kind of policy is right for you, talk to a local agent.

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This content is for informational purposes only and may not be applicable to all situations.

Please note that Allstate or its agents and representatives cannot give legal or tax advice. The brief discussion of taxes on this page may not be complete or current. The laws and regulations are complex and subject to change. For complete details consult your attorney or tax adviser.

1Partial withdrawals and surrenders from life policies are generally taxed as ordinary income to the extent the withdrawal exceeds your investment in the contract, which is also called the "basis." In some situations, partial withdrawals during the first 15 policy years may result in taxable income prior to recovery of the investment in the contract. Loans are generally not taxable if taken from a life insurance policy that is not a modified endowment contract (MEC). However, when cash values are used to repay a loan, the transaction is treated like a withdrawal and taxed accordingly. Unpaid interest on loans is added to the loan principal, thereby increasing the total debt on the policy. The combination of an increasing loan balance and deductions for contract charges and fees may cause the policy to lapse, triggering ordinary income tax on the outstanding loan balance to the extent it exceeds the cost basis in the policy. Loans, if not repaid, and withdrawals reduce the policy's death benefit and cash surrender value.

This life insurance information is provided for general consumer educational purposes and is not intended to provide legal, tax or investment advice. Allstate life insurance issued by Direct General Life Insurance Co., 911 Chestnut Street, Orangeburg SC 29115; Allstate Life Ins. Co. & Allstate Assurance Co., 3075 Sanders Rd, Northbrook IL 60062; American Heritage Life Ins. Co., 1776 American Heritage Life Dr., Jacksonville FL 32224. In New York, life insurance issued through Allstate Life Insurance Company of New York, Hauppauge NY. Life insurance also offered and issued by third party companies not affiliated with Allstate. Each company is solely responsible for the financial obligations accruing under the products it issues. Product guarantees are backed by the financial strength and claims-paying ability of the issuing company.

Securities offered by Personal Financial Representatives through Allstate Financial Services, LLC (LSA Securities in LA and PA). Registered Broker-Dealer. Member FINRA, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE 68506. 877-525-5727. Check the background of this firm on FINRA's BrokerCheck website (

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