When a new family starts out, the need for insurance coverage may be low. They may even find an employer's group term life insurance policy provides adequate protection from the loss of income due to a death. But, when families start adding long-term financial commitments such as owning a home or having children, insurance needs begin to change. The loss of income could be devastating to the financial security of the remainder of the family, especially if children are involved.

In fact, young couples just starting a family often find themselves bombarded with offers for life insurance policies. Many are pitched whole life policies. These policies typically have higher premiums than term life insurance because they provide lifelong protection and have a cash value buildup. When evaluating life insurance offers, those starting a family often find that term life insurance can provide protection to meet a growing family's needs, at a fraction of the premiums other policies require.

Term life insurance provides affordable coverage

Term life insurance is an excellent option for those expecting children, especially when the difference between term life insurance premiums and insurance premiums for other types of life insurance products is invested.

Suppose, for example, a whole life policy paying out $100,000 upon death costs a healthy individual $120 per month in premiums, while the same individual could purchase a 30-year level term life insurance policy for $20 per month. If a young couple invested the $100 difference in a mutual fund earning 8 percent for 30 years, they could have a nest egg worth close to $150,000 by the time their term insurance expired.

Term only provides insurance when needed

Some of the most popular term life insurance policies are for 20 or 30 years, which is often an optimal length of time for those starting a family. Once the term is over, the temporary insurance lapses and the requirement to pay premiums also stops. The benefit of term insurance to many young families is their need for insurance protection will become greatly reduced around the time their term insurance policy expires. After 30 years of paying for insurance coverage, a family should have--in theory--paid off their home, paid off most outstanding consumer debt, and sent their children to college. If all those life events have been completed when the term insurance expires, there is little reason to carry insurance.

Understanding Changes to Your Insurance Needs

Starting a new family is often stressful enough. A young family does not need the burden of trying to decipher between complicated life insurance products. For most young families, especially those with new children on the way, term life insurance represents affordable protection that allows them the freedom to begin saving, investing, and paying for the new expenses that little ones bring to a family.