A life insurance plan is especially important if you’re a single parent because it provides financial protection to your children when you’re gone.
Updated August 24, 2021|4 min read
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If you’re a single parent, life insurance is a financial protection must-have. If one parent dies in a two-parent household, the surviving parent may be able to provide income to keep up with expenses. But single parents may not have another source of financial support for their kids if they pass away unexpectedly.
A life insurance policy creates a safety net for your child’s everyday expenses, continuing education, and care. Make sure they get all of the support they need by getting the right amount of life insurance and choosing your beneficiaries carefully.
Single parents need life insurance so that their children have financial support if they die unexpectedly
Your policy should cover your debts, income, and future expenses for your child, like tuition or savings
It’s best to name a guardian or trust as your policy’s beneficiary because minors can’t accept life insurance payouts
The exact amount of coverage you need depends on three main factors:
Income: Experts recommend having a death benefit of at least 10 to 15 times your annual income. This can cover everyday expenses like bills and groceries.
Outstanding debt: Your child won’t be responsible for your debts, but any co-signers will, and creditors can seize property for loans that weren’t co-signed. Your policy should last as long as your longest debt and be large enough to pay it off.
Future expenses: If you plan to send your child to private school, pay for extracurriculars, or establish a college or savings fund for them, factor that in.
Add those three factors together to get a sense of how much coverage to buy. You’ll need to factor in end-of-life expenses for yourself, too. You may need more coverage than someone who can rely on a surviving co-parent to contribute to your child’s care.
The best type of life insurance for single parents is term life insurance. Term policies are flexible, easy to understand, and affordable. A 35-year-old parent can buy a $1 million, 20-year term life insurance policy for $42-53 per month.
Whole life insurance, the most common alternative to term life, offers lifelong coverage and a savings feature, but at five to 15 times the cost. The extra features aren’t worth the cost unless you’re a high-income earner.
Don’t buy a policy for your child. Standalone life insurance for children is costly and, unless your child has an illness that will make getting their own policy difficult as an adult, unnecessary. If coverage for your kid would give you peace of mind, add a child insurance rider to your own policy for about $5 per month.
Many parents instinctively want to make their children the beneficiary of their life insurance policy. But it’s a bad idea because a minor can’t legally accept life insurance money.
Instead of naming your child, name their future guardian or a trust as your beneficiary. Leaving the money to a minor child can stall the insurance payout in legal proceedings for years.
You’ll need to name a guardian to care for your child in case of a worst-case scenario. Naming this person as a life insurance beneficiary will allow them to put the payout toward your child’s care.
You can also split the death benefit among additional beneficiaries — like a trusted relative — and assign contingent beneficiaries to accept the payout if the primary beneficiaries can’t.
Instead of naming a legal guardian to receive your insurance proceeds, you can create a trust and name that trust as your policy’s beneficiary. You’d then name your child’s guardian to be the trustee and manage the money according to your wishes.
Note that money in a trust can sometimes lower a child’s eligibility for financial aid. A financial advisor can help you decide which beneficiary option is best.
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There are two actions that will ensure that your death benefit goes toward your child’s care, no matter who the beneficiary is: creating a will and testament and regularly updating your beneficiaries.
Use your will to clearly state how you want your life insurance proceeds to be used. You can decide both which expenses the funds should cover and how much should go toward each expense.
Review your life insurance beneficiaries after major life events — like a marriage, divorce, or the death of a beneficiary — so that someone you trust will receive your death benefit. Without any living beneficiaries, no one can file a claim for your policy and the money will get tied up in court.
Single parents should share their end-of-life plans with their beneficiaries and other loved ones. Tell your beneficiaries where to find important documents like your life insurance policy and contact information for any lawyers or financial advisors you’ve worked with.
Make sure they know how to file a life insurance claim and where to get the documents they’ll need to begin the process.
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.
Buying a life insurance policy is one of the best things you can do to protect your child’s financial future. Make sure to buy enough coverage to provide for their care and pay your debts, and only name a reliable guardian or trust as your policy’s beneficiary. These simple safeguards guarantee that your child has the support they need no matter what.
Life insurance is essential for single parents. A policy guarantees financial support for your child and other loved ones when you pass away.
Most parents should buy term life insurance because it’s affordable and flexible. If your child will depend on you for life, you might consider whole life insurance.
It depends on how much coverage you buy and your age and health. A 35-year-old parent might pay $42-53 per month for a $1 million, 20-year term policy.
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