In my experience, when people are young and single, they tend to make price-based insurance buying decisions rather than focus on the quality of coverage. Thus, they often end up shopping for insurance online, which can get them standard coverage quickly. However, when they start a family, their circumstances become more complex and their priorities shift to finding a safe home, securing their financial future and making sure the right protection is in place for the family. Although, price is still an important consideration, it’s no longer the driving force in the decision making process.
In this blog I discuss the most common exposures you will likely face when starting a family, and list the appropriate insurance programs to consider for your protection.
Babysitting or carpooling with other people’s children: If you have young children, then most likely you watch other parents’ children or drive them in your car. Without adequate insurance, your family’s assets and financial well-being could be jeopardized in case you, the children or the other driver are hurt.
Coverage: Generally, I recommend at least $500,000 homeowners liability insurance and an umbrella insurance policy with a limit that meets your needs, which should protect you if the injury happens on your property while babysitting.
Similarly, make sure you have at least $250,000 bodily injury/$500,000 aggregate liability/$100,000 property damage auto coverage when transporting other children. Having said that, everyone’s needs are different depending on whose fault the accident is, thus it’s best to discuss the appropriate limits with your broker for your unique situation.
If you or any of the children in your car are injured in an accident caused by another driver who does not have any or enough auto insurance, you will need uninsured/underinsured motorist policy to reimburse you and the children for any economic damages, medical expenses and costs not covered by other types of insurance.
If you are at fault, and the children in your car or the other driver are severely injured, you need bodily injury liability and property damage to cover their medical expenses, lost wages, pain, suffering and legal costs in case of a law suit.
Having a nanny at home: You may choose to hire a full- or part-time nanny or an au pair, who can get injured in your home or while driving your child. As an employer, you are potentially liable for their medical bills as well as lost income for the rest of their life.
Coverage: Depending on the state you live in, you may be required by law to purchase domestic workers’ compensation insurance. The state of Maryland, for instance, requires all employers to provide workers’ comp insurance to all household employees who earn more than $1,000 per quarter.
If your child caretaker is driving your car to transport your child on a regular basis, you will need to add them to your auto policy. There may be a small increase in premium for covering the additional person.
Having your child in daycare: If you cannot secure help from family members, you may need to rely on daycare centers for your child care needs, where they can get hurt by other children or by the care providers.
Coverage: Make sure that you request a certificate of insurance from the facility to verify they have sufficient daycare liability coverage that makes you comfortable. In case of an accident or injury, your child’s medical and legal expenses should be covered.
Operating your own daycare: Due to high child care costs, parents often decide to save and derive additional income by operating their own child care business out of their home. If you are one of them, you are liable for the children’s safety and well-being while they are in your house or while driving them.
Coverage: In Maryland, insurers are required by law to offer licensed family day-care providers liability coverage of at least $300,000 for liability that results from bodily injury, property damage, or personal injury arising out of an insured’s activities as a family daycare provider. Because some homeowners insurance policies limit coverage for in-home daycare operations to four or less children cared for, you should consider purchasing an in-home child care insurance policy to protect yourself. It can be customized to address your particular needs by including bodily injury and property damage, abuse and molestation, errors or omissions, workers’ compensation, and other types of coverage.
A parent’s death: In case either you or your spouse passes away, your family can be left with substantial expenses and debt including cost of the funeral, mortgage, living expenses, and tuition.
Coverage: You should consider purchasing life insurance for yourself and your spouse. When selecting the right coverage you should evaluate how much money will be needed if one of you passes to cover immediate expenses, and provide future income to support your household. There are a number of life insurance calculators available that can help you quickly determine a ballpark amount, which then you should always discuss with a life insurance specialist to confirm your needs.
Calculators:
http://www.lifehappens.org/insurance-overview/life-insurance/calculate-your-needs/
https://www.calcxml.com/calculators/life-insurance-calculator
The two most common types of life insurance policies are Term and Whole life insurance.
Generally speaking, Term life insurance is designed for a younger, healthier audience who would like to have financial security for their families for a temporary term. You can purchase different lengths of coverage ranging from a one-year to a 30-year plan. Premiums for Term life insurance can be significantly more affordable than Whole life insurance, and it offers fixed death benefits for the life of the policy. However, your premium depends on your age and health at the time of purchasing the coverage – the older you are the more expensive it will be. So, I highly recommend considering this policy while you are younger and healthier.
The Whole life insurance, on the other hand, is often more suitable for people who would like to build wealth by the end of their lives. It includes guaranteed death benefits for life, rather than for a specific period, and guaranteed cash value for a set premium. Your premium payments at some point become available to you as a cash value if you decide not to continue with the original plan. However, it is much more expensive than the Term life insurance, which is a consideration for a young couple starting a family.
Becoming disabled: The risk of a disabling sickness or injury is often greater than premature death. If you or your spouse became disabled today, would you be able to pay your bills and support your family?
Coverage: Disability insurance replaces part of your income when you are unable to work due to sickness or injury. Many employers offer both Short Term Disability (STD) and Long Term Disability (LTD) plans. Typically, STD is available only for 3 to 24 months, and you may have to wait up to 90 days before benefits are paid. LTD, on the other hand, is designed to provide income for an extended period of time, but it may take from 90 days to a year before you receive benefits. Make sure you understand your employer-provided benefit plan to determine whether you need additional optional coverage for your family’s protection.
Starting a family is an exciting time and while insurance may not be your top priority, it is crucial to protect your family. Contact me at john@psafinancial.com if you have any questions regarding your personal risk management or if you need guidance in selecting the most appropriate options for your needs.
