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Why Parents Don't Have Enough Life Insurance

Kimberly Palmer

You might guess that becoming a parent--that moment when you take on responsibility for a small, dependent little person--might be the life change that most inspires people to take out life insurance. You'd be wrong.

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In fact, MetLife's 10th Annual Employee Benefits Trends Study recently found that it's a wedding, not a birth, that is most likely to lead consumers to take out new life insurance policies. The survey found that half of single working men and women without dependent children have life insurance. The percentage shoots up to 72 percent among married workers, and is just a bit higher, at 75 percent, for married couples with young children.

Why is it that more parents don't take out life insurance? Possible obstacles include the cost, the logistical hassle (taking out a policy often requires a brief health check-up), and the simple fact that thinking about, and planning for, one's own demise is no fun. As Carmen Wong Ulrich, president and co-founder of ALTA Wealth Management, puts it, "Insurance is for those 'what-if' moments that we don't like to think about."

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MetLife similarly encourages parents to take the plunge to ensure their family would be protected in case of their own death. Given the high cost of raising children--the Agriculture Department recently raised its estimate to $234,900 per child before age 18--parents need to find some way of making sure their children would be fed, clothed, and educated in their absence. And the cost of taking out a half-million dollar policy on a healthy 35-year-old can be as little as a dollar a day, according to MetLife.

Even parents who do have some life insurance might be under-insured. MetLife found that on average, workers' life insurance covers about three times their annual household income. Traditionally, financial experts have recommended that people take out at least seven times their income. Since specific needs vary so much, a better approach can be to calculate how much it would take to replace a breadwinner's salary, or what costs, such as college tuition, the family would like to be able to cover.

Here are more findings from the MetLife survey:

-- Just 2 in 5 working parents "feel very confident" that they're making the right financial choices for their family.

-- Most employers--3 in 4--offer some kind of life insurance to employees. Supplemental insurance can add to it. Ulrich points out that employer-provided coverage doesn't travel with you if you move or lose a job, so workers should be sure to have outside coverage as well.

-- One in 3 parents of young children say they don't get financial help from anyone.

-- Life insurance needs often increase over time, especially as families grow, so parents might need to add to their coverage over time.

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Along with prepping the nursery and stocking up on diapers, expectant parents should add one more item to their to-do list: Taking out, or beefing up, life insurance policies. Their children might one day depend on it.

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