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Expectant CoupleWhether it's your first born, or the addition of another child, having a baby is cause for celebration. The birth of a new child also requires the need to consider some careful financial matters.

Below are a couple tips we'd like to recommend as you plan after the birth of your newest addition.

Life Insurance

You've got a new dependent now. Life insurance is a must, even if you start with a small 20 or 30 year term policy.

Such coverage helps ensure that your spouse and children will be able to maintain their standard of living should you die or become disabled.

How much coverage and what kind of policy you need depends on you. Some may say base it on your family's monthly expenses, net worth, spouse's income, etc. Some may 7 to 10 times your income. This is a personal decision, and there is no magic formula. Discuss with someone you trust, and make a decision that you are comfortable with.

Life insurance comes in three basic varieties: term, whole life, and universal.

Term life policies provide coverage for a limited number of years -- often 15, 20 or 30. If you outlive the term, the policy expires and no benefits are paid out. It is generally more affordable than whole life or universal coverage.

Whole life insurance guarantees a specified benefit payable to your spouse or other beneficiaries upon your death in exchange for a premium that is determined by the insurance company based on long-term interest rates and other projections. It also accumulates cash value over time and offers the opportunity to earn dividends.

Universal life insurance is a hybrid, of sorts, allowing the purchaser to set her own premium (beyond a required minimum) and death benefit. In essence, it is a permanent insurance policy that combines term insurance with an account that earns a tax-deferred rate of return declared by the insurance company.

There's no one insurance policy or coverage amount that's right for everyone. Some people prefer to consult an insurance professional to sort through the options. Whichever policy you choose, however, it's important to choose a company in good financial standing.

You can check an insurance company's financial health by looking at its rating from credit rating agencies like Moody's, which gives top tier companies an "Aaa", and A.M. Best, which gives its highest ranked companies an "A++".

Meanwhile, disability income insurance provides you with income should you become too sick or injured to work. This coverage is often an after thought, and would encourage you to make this coverage a priority.

Beneficiary forms and Wills

After any life event, including a marriage, divorce, or birth of a child, you should update the beneficiary forms for your life insurance policy, annuities, and retirement accounts, such as your IRA or 401(k).

Such forms, which usually trump your will if a discrepancy in beneficiaries exists, help ensure those assets will eventually pass to your heirs outside of probate. Probate is the lengthy and costly legal process by which the courts settle your estate after your death.

If you haven't done so already, both parents should also work with an attorney to create a will, a living will, and powers of attorney, especially if you have children from a previous marriage,.

There's nothing like a newborn to melt your heart, or drain your wallet. By planning ahead, however, expectant parents can rest assured that their budget is balanced and their loved ones are provided for — even if they aren't getting any actual sleep.

We can help you find the right coverage for your needs and your budget. Call Raymond Preston & Reed, LLC at (615) 866-2728 for more information on Tennessee life insurance.

(Article Courtesy: Mass Mutual)
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