When families welcome a newborn, there are many exciting decisions that must be made. Decisions including pediatrician selection, work schedules, housing, and day care must be made when a family brings home a newborn. One topic that can have a significant impact on the newborn’s future is Texas life insurance for one or both parents.

Many young families either ignore or overlook the need to evaluate their life insurance options. The addition of children to a family significantly increases the financial responsibility of the parents. Parents need to inventory their long-term and short-term liabilities; make assumptions involving their children’s future needs such as ongoing living requirements and post-secondary education expenses; and finally arrange for estate transfer.

For example, the addition of a child may necessitate a Texas life insurance policy which would retire a $200,000 mortgage, replace three years of a parent’s $80,000 annual salary, substantially fund an anticipated $70,000 college education and provide for a $100,000 tax-free estate transfer. Under this scenario, a life insurance policy in excess of $600,000 would be required to meet the defined requirements.

Of course, if the family adds a second child, the same level of coverage would not be needed because the original policy would retire the mortgage. However, a policy with a $290,000 death benefit would be needed to replace half of the $80,000 annual salary for three years, to fund the second child’s expected college education and to provide for a $100,000 tax-free estate transfer.

Young families should also consider the length of coverage for the policy being reviewed. The death benefit and the length of the policy have the two biggest impacts on premium cost. The longer a policy term, the higher the premium because the exposure to the carrier is increased. If the policy is purchased when children are young, a 20- to 25-year term policy may be required in order to provide benefits until the children graduate from college or reach an age where they are no longer financially dependent on the parents. If children are older, a shorter term policy is advantageous because the financial exposure is more limited. A family with the youngest child at age 20 does not need a large death benefit because ongoing expenses such as college are minimized as compared to the requirements of a family with younger children with secondary education expenses ahead of them.

The increase in family size has a significant impact on Texas life insurance decisions. The important decision begins with making the commitment to purchase financial security for the family. Life insurance is an important component of this financial planning and ultimately the key concern needs to be affordability over the long term since lapsing expensive life insurance (generally permanent life coverage) is a great deal more common than most people think. This would point to temporary or term life insurance for most needs resulting from a growing family but it\’s best to discuss the particulars of your situation with a licensed Texas life insurance agent to make sure you match your needs with the best plan on the marketplace.

Tim Jarvis is a licensed and experienced Texas life insurance agent who focuses on educating his fellow Texans on the best way to shop and quote Texas life insurance coverage