Baby on Board Changes Insurance Needs

A new baby touches every facet of a family’s life, including their finances. According to the National Center for Health Statistics, more babies are born in August than in any other month. The National Association of Insurance Commissioners (NAIC) suggests these steps to help new parents protect their growing family.

Health Insurance

• Understand your coverage before the baby arrives. Review coverage options and find out exactly how your health care plan handles the costs of a new baby. Remember to consider prenatal vitamins, prenatal and neo-natal screenings and tests, emergency procedures, delivery (C-section and traditional) and pediatric care.
• Notify your insurer of your new baby. Make sure you are aware of the deadline and requirements to register your newborn with your health insurance company. Similarly, if you are adopting a child, consult your employer and health insurance provider for the requirements to obtain health insurance coverage in advance. For more information, check with your state insurance department at www.naic.org/state_web_map.htm.
• Evaluate your options. If both parents have employee benefit options, compare the health insurance policies to see which one best fits the needs of your family. Review the co-pay amounts and different options carefully to see exactly what is covered – and what isn’t – for both parents and children. Most companies will allow you to make enrollment changes when a baby is added to the family. Check with the benefits administrator at your office about your options.
• Make use of tax advantages. Ask if your employer offers a flexible spending account or health savings account (HSA). These plans allow you to set aside pre-tax dollars for medical expenses and child care.

Life Insurance

• Plan the contributions of both spouses. Consider covering both spouses with life insurance, even if one is not employed outside the home. In the event of the stay-at-home parent’s death, the insurance policy can help the surviving spouse with the financial necessities of the household.
• Account for child care costs. In determining the amount of life insurance to purchase, take into account your full child care costs (housing, education, child care, medical needs, etc.), especially for children under five years old or for kids with special needs.
• Understand the types of life insurance. Understanding your life insurance choices will help you weigh the costs and benefits of whole life versus term life insurance as part of your overall financial plan.
  • Whole life insurance. Whole life insurance policies build cash value and pay a death benefit, but are more expensive. If you can’t afford whole life insurance right now but think you may want it in the future, consider term life insurance with a conversion option that will let you change to a whole life policy for a fee when you are ready.
  • Term life insurance. Term life insurance offers death benefit protection for a specified time period. For example, term life insurance may be appropriate during your child-rearing years or while paying off a mortgage. Term life premiums increase as you age. Term life is typically less expensive in your younger years than permanent life insurance, which covers you for your entire life and typically has level premiums. 
• Keep your policy current. Remember to update your policy to include your children as beneficiaries. If your children are under the age of 18, name a trustee who would administer the benefit of the policy until they are adults.

Auto Insurance

• Check rates before upgrading vehicles. Auto insurance premiums are linked to vehicle age and type, so if you decide to get a larger vehicle, like a mini-van or SUV, to transport your family, it could affect your premiums.
• Plan for carpools. Consider increasing your liability insurance in case of an accident when transporting other kids.

Homeowners Insurance

• Notify your insurer of major additions. Alert your insurance company when making any major home improvements (usually anything over $5,000) to prevent being underinsured.
• Protect the backyard. Inform your insurance company if you install backyard items for kids, such as a swing set, trampoline or swimming pool. You might consider increasing your liability coverage – that protects you in the event that someone is injured while on your property – with an umbrella policy.

More Information

If you have questions or are confused about your insurance coverage, contact your state insurance department. Visit www.NAIC.org to find contact information for your state insurance department.

Get smart about your insurance needs! For more information about auto, home, life and health insurance options - as well as tips for choosing the coverage that is right for you and your family - visit www.InsureUonline.org.