Life Insurance for Young Families: What New Parents Need to Know (2025)

My friend had a baby last year and texted me “we should probably get life insurance right” about three months after the kid was born. I was like YES YOU SHOULD and also WHY DID YOU WAIT THREE MONTHS.

Having a kid is the absolute trigger for getting life insurance. Nothing makes you more aware of your own mortality than being responsible for a tiny human who can’t do anything for themselves and won’t be able to for like two decades.

And yet so many new parents put it off. There’s so much else happening—sleep deprivation, diapers, figuring out childcare. Life insurance feels like one more thing on an endless list. But it’s actually one of the most important things on that list.

Why it’s urgent now

Before kids you could die and your spouse would be sad but probably fine financially. After kids? If you die, your spouse has to raise a child alone AND replace your income AND pay for childcare they might not have needed before.

The financial hit of a parent dying is massive. Like life-altering. Like potentially losing the house and changing everything about how the kid grows up.

And here’s the thing—you’re never healthier than you are right now. Insurance is based on health. Wait five years and who knows what changes. Get diagnosed with something and suddenly you’re either paying way more or uninsurable entirely.

Lock in how much coverage while you’re young and healthy. It’s the smart move.

Both parents need coverage

This is the one people mess up. Primary earner gets insurance, stay-at-home parent doesn’t. Wrong.

If stay-at-home parent dies, the other parent needs to pay for childcare. Full-time childcare is $1,500-3,000+ a month depending on where you live. That’s $18,000-36,000 a year. For potentially 10-15 years until kids are old enough.

Stay-at-home parents provide economic value even if it’s not a salary. Insure both parents.

How much coverage

Did a whole article on this but quick version for new parents:

Replace income for 15-20 years (until kids are grown). Pay off mortgage so family keeps the house. Cover childcare costs if applicable. Maybe college fund. Pay off debts.

For most families with young kids we’re talking $500,000 minimum. More likely $750,000-1,500,000 depending on income and location.

Yes that sounds like enormous numbers. But term life insurance insurance is cheap when you’re young. A 30-year-old can get $1 million in 20-year term for like $40-60/month if they’re healthy.

Term is probably right

I have a whole article on term vs whole life but for most young families, term is the answer. You need massive coverage for the next 20 years while kids are dependent. After that? Kids are grown, mortgage is paid off, you’ve built retirement savings. Coverage needs drop dramatically.

20-year term aligns perfectly with this. By the time it expires the need has mostly disappeared.

Whole life costs 10x as much for same death benefit. That money is better spent on actual investing, paying down mortgage faster, or 529 plans for kids’ education.

When to buy

Ideally during pregnancy. Baby isn’t born yet, you’re probably still healthy, good time to get policies in place before sleep deprivation makes everything harder.

Second best: as soon after birth as you can manage. Don’t wait until the kid is six months old because you kept putting it off. Ask me how I know people do this. (They do. A lot.)

The application process takes a few weeks usually. Medical exam, underwriting. Factor that in. If you want coverage in place by the time baby arrives, start early.

What my friend did

Both parents got $750,000 in 20-year term. Combined premium was about $80/month. They make about $120,000 combined, have a mortgage, want to cover potential childcare costs if either dies.

By the time policies expire their kid will be in college, they’ll have significant retirement savings, mortgage will be paid down substantially. Coverage need will be way lower.

$80/month is basically nothing for the protection they now have. Peace of mind that if something happens, the surviving parent and kid will be financially okay.

Don’t forget to update beneficiaries

This is a common mistake. You had life insurance before having kids, named your spouse as beneficiary. Baby arrives, you need to update. Some people add the child as contingent beneficiary. Some set up trusts for minor children. Point is—review this when family situation changes.

Also update your will. That’s not insurance but it’s related and important. Who raises your kid if both parents die? Get that documented.

Liability just ate something weird in the yard and I should probably figure out what—but seriously. You have a kid now. Get life insurance. Both parents. Enough coverage to actually replace your income. Do it before you forget for another three months.