The single parent’s guide to life insurance

Getting life insurance provides important protection to anyone with dependents, but single parents might find that getting coverage is exceptionally prudent.

Life insurance helps you complete your financial plan and ensure the financial security of your children. Unlike other types of insurance, life insurance isn’t meant to be used by the person who pays for it — it’s meant to be used by your loved ones.

Your beneficiaries receive the death benefit if you die unexpectedly, which makes up for the income you once brought home. You want to make sure you leave enough for your loved ones to cover their everyday expenses plus future costs, like mortgage payments and college education for your kids.

If you’re a single parent, life insurance is an especially important financial protection to have. If one parent dies in a two-parent household, the surviving parent may still be able to provide some income to keep the family solvent. But as a single parent, there may be no one else to take care of your children financially if you’re gone. A life insurance death benefit can be an assurance that there is money to pay for your children’s everyday expenses, continuing education, and overall financial stability.

Key Takeaways

  • Any time someone relies on your financially or could be impacted by your debts, you should get a life insurance policy

  • The amount of life insurance coverage you get should match your financial obligations and outstanding debts

  • Because minors cannot legally receive the death benefit, naming a trust or legal custodian as your policy’s beneficiary is the best way to ensure your children can access it

Compare the market, right here.

Policygenius saves you up to 40% by comparing the top-rated insurers in one place.

When to buy life insurance

Any time you have dependents who rely on you financially or financial obligations that your loved ones would be responsible for if you died, you should get life insurance coverage to protect them.

It’s impossible to foresee the wrench life might throw into your plans. Even if a spouse is the main breadwinner, marriages can end and loved ones can die unexpectedly. Life insurance gives you the peace of mind that if something terrible happens, the people who rely on you don’t suffer financially. And if you’re a single parent — your little ones are likely relying on just you for housing, everyday expenses, and more.

Side note: sometimes it may be wise to buy life insurance when you’re younger even if you don’t have any dependents yet. The older or less healthy you are, the higher your premiums will be. Because life insurance coverage is meant to last for decades, by the time you have a family, you may be glad you locked in a lower premium rate when you did.

How much life insurance do I need?

The coverage amount you need is the most important consideration when taking out a policy. While your family won’t be on the hook for any debts to which they are not co-signed, if the house or car is in your name, and you’re not around to keep paying for them, those items could still be repossessed. . (Note: beware of debt collectors who come calling after your loved one’s death! It’s legal for them to call you, but you owe them absolutely nothing if you weren’t a co-signer on the debts.)

For that reason, you need to take stock of any possible expenses when determining what amount of coverage you need. As a single parent, that means thinking about your income, current expenses, like groceries, mortgage payments and summer camp tuition, and your anticipated future costs, such college tuition and any medical bills for your child. Here’s what you need to take into account when determining your life insurance coverage:

  • A coverage amount that is 10-15 times your income, so that your children can rely on your replaced income for years to come

  • Outstanding debts to ensure that your car or house are not repossessed

  • The cost of your bills, everyday expenses, and housing

  • Anticipated future costs, if you plan to cover your child’s college education and any medical expenses

You also need to figure out how long your life insurance coverage should last. Your life insurance coverage should cover your longest debt and any financial obligations so that your loved ones don’t become liable for them. If you have a mortgage of 30 years, you want your policy to last those entire 30 years. Should you die and the mortgage payments can’t be made, your children might lose their housing.

Most people need about 20 to 30 years worth of term life insurance coverage: long enough for your child to go to college, potentially even start their own family, and for your mortgage to finally be paid off. By the time you’re ready to retire, hopefully you’ll no longer have any dependents who will be financially burdened by your death, and you won’t need your life insurance policy after the term expires.

Policygenius makes it easy to plug key numbers and lifestyle factors into our coverage calculator to determine how much you need, and how much it’ll cost you. You can see how much your premiums will go up with each increase in coverage and you can make an informed decision after seeing your options and apply within minutes.

As a single parent, you already know how expensive it is to raise a child on your own. But if you were to die unexpectedly, there would also be end-of-life expenses to consider, such as the cost of your funeral. Adding all that together, you can get a picture of the coverage you need. You’ll even want more coverage than a two-parent household because there won’t be another person to continue paying the bills.

Who to name as the beneficiary

As a single parent, the first thing you want to do is make sure you name the right beneficiaries when you’re getting coverage. Leaving your children the death benefit won’t be as simple as naming them the beneficiaries on your policy.

Because life insurance companies are prohibited by law from paying out to minors, you will need to list a designated caretaker or trust as the beneficiary. If a child under the age of 18 (and in some states, 19) is listed as your life insurance beneficiary, then the death benefit may instead end up going to a court-appointed legal guardian or get tied up in court proceedings for years.

Naming a trust as the beneficiary

Instead of naming your children as your policy’s beneficiaries, you can name a legal guardian of your choosing to oversee the funds as part of a trust. The custodian will use the death benefit to make payments on behalf of your children, such as those for their education expenses, and can even continue making mortgage payments for a house you want them to continue living in (with appropriate supervision, of course).

Check with a certified financial planner about your best course of action, because money in a custodial account could count as an asset when determining a child’s eligibility for financial aid.

Naming a caretaker or someone you trust

To prepare for a worst-case scenario, you’ll want to name a legal guardian for your children if something happens to you. This same person can be listed as the beneficiary of your policy and will be responsible for overseeing the funds and dispersing it to your children (so make sure it’s someone you trust).

If you’re not married to your child’s other parent and they are still alive, you’re under no obligation to give any part of the death benefit to them, even if they’re in the picture or otherwise contribute to your child’s well-being. However, you’ll probably want to give some part of the death benefit to an adult with whom the child has a close relationship if you trust that person to spend it on the child. You can name as many beneficiaries as you want and allocate what proportion of the death benefit each will receive.

It could also be beneficial to set up a will and testament to designate a caretaker for your children and lay out your wishes about how the death benefit should be used. Using a will and testament, you can delegate how much of the death benefit should go towards each expense.

Otherwise, the death benefit could be tied up in court for a protracted legal battle, during which your children wouldn’t be able to access it.

Keep your beneficiaries updated

Securing the death benefit for your children requires consistent upkeep of your policy. With every big life change, you should review your life insurance beneficiaries to ensure they align with your present life circumstance.

That could mean removing an ex-spouse, for example. But you may need to be divorced instead of separated in order to remove them as a beneficiary — some so-called “community property” states legally mandate that you name your spouse as the beneficiary of a life insurance policy.

If you have a trusted legal guardian listed as your beneficiary and they predecease you, you should also be sure to update your policy. Otherwise, the death benefit could again be tied up in court or paid out to your estate, once again limiting access for your children.

To avoid a circumstance where your children don’t get to utilize a death benefit you got for their financial stability, it’s a good idea to update your beneficiaries every so often. After all, if the worst happens, you won’t be able to update your life insurance company.

Ready to shop for life insurance?

Start calculator

Making a budget to afford life insurance

Creating a budget before you shop for life insurance but after you’ve calculated your coverage needs can help you determine how much you can afford and how much room you should make in your budget to pay for premiums.

If you’re a single parent, you might also want to consider setting money away in a specialized savings account. That could mean putting money into a tax-advantaged 529 plan, which your child can draw from for their education expenses. Money in a 529 accrues compounding interest: your returns reinvest themselves, so you can get returns on your returns, like an individual retirement account.

Budgets are also just good financial planning. You may have unnecessary expenses you don’t even know about — e like accidentally spending $3,600 on candles every month. A budget can help you figure out where to cut back and how to maximize the money you earn. Because a life insurance policy helps you complete your financial plan, creating a budget to monitor your spending helps you get a picture of that financial plan in action.

Tools to use

The easiest way to make a budget is to just write it all out on a spreadsheet program like Microsoft Excel or Google Sheets. Put your spending categories at the top and add a row for each expense, and make sure you don’t exceed your allotted spending in each category. You can automate the program to run the equation for you, so the process is painless.

Alternatively, meeting with a financial adviser can help set you up for success. Using their expertise, they can do a deep dive into your savings, expenses, and coverage needs to create a strong financial strategy for you.

Claiming the life insurance death benefit

As a single parent, you’ll want to ensure your child knows exactly what to do in the event of your untimely death. In addition to having the number of your lawyers and important relatives on file, if your children are old enough, they should know where to find your life insurance policy document.

You can leave behind written details about your policy, such as the insurer’s name, your full name, and the policy number, for your children or their guardian. The document should also describe who to contact and outline the following items they will need to file a death benefit claim:

If you are the child of a single parent and know you’re the beneficiary of their life insurance policy but can’t find the details, you can search for it through your state’s insurance department. The NAIC Life Insurance Policy Locator is a good place to start.