5 Questions Single Parents Have About Life Insurance

By | January 17, 2023

Parenting is a difficult but rewarding journey that begins any adventure. And when you’re a single parent, the journey can be even more difficult. This is true that when it comes to making financial decisions,

Single parents have unique questions about life insurance. Let’s discuss some common questions counsellors hear from single parents.

Being a Single Parent Why You Need Life Insurance?

Although insurance benefits all households, single-parent households must strongly consider life insurance as part of their financial strategy.

Single parents must acknowledge the absence of a backup parent. Unlike a two-parent household, if a single parent dies, there may not be a clear choice as to who will help pay the bills or take care of the children. Life insurance can give you the financial security that may not be there to help answer some tough questions.

Life insurance is important because single-parent households are less likely to have life insurance. One study found that 69 per cent of single parents with children still living at home do not have life insurance. You can compare that to the 45% of two-parent households that don’t have active life insurance. If you’re a single parent, it’s time to plan to make sure you know your family is properly covered.

What does your life insurance help cover?

Life insurance can assist you in paying for the expenses that will continue for your children and dependents after you die. These expenses may include house payments (rent or mortgage), debt, current and future education needs, end-of-life expenses, child living expenses, child care, etc.

Life insurance is money you can transfer to your loved ones to help them live their lives, and it’s usually tax-free. If you want to read more, check out this article with more details about life insurance.

How much life insurance should you have as a single parent?

Considering your lifestyle, responsibilities, and the future care and education of children is the 1st step in knowing how much life insurance you need as a single parent.

Then, to help you determine your needs, we recommend using a life insurance calculator like this one. You can get a ballpark estimate of how much money it will take to provide for your family if you pass by answering a few key questions.

Finally, it would help if you spoke with a life insurance agent to help you find the best policy and price for your needs.

How do you get a life insurance beneficiary as a single parent?

Emergency and end-of-life planning is a necessity for all single parents. Your friends and family need to know what happens to your dependents after death. So, even though the conversation is no fun, you will need to include life insurance in your end-of-life planning discussions.

Typically, a parent will name their spouse or the other parent of their child(ren) as the beneficiary (the person who receives the death benefit cash payment). However, if there is no parent in the picture, you must first decide who will care for your children if you pass.

Then secondly, is he the person you would trust to receive money for the care of your dependents? We recommend talking to your family and any trusted financial or estate planners, so your plan is solid.

Whatever you do, don’t name your child as a beneficiary—the law prohibits anyone from receiving life insurance payments unless they’re of legal age (from 18 or 21, depending on your state). Maybe). For more information on naming beneficiaries, click here.

What type of life insurance should single parents have?

The world of life insurance is vast and varied these days, but here are a few standard options to get you started in finding the policy that’s best for a single parent.

Term Life Insurance

If funds are limited or cash flow is tight, as is often the case for single parents, term insurance is a great option. Term insurance offers a cash payout to your beneficiaries if you die during the term. In return for the death benefit, you pay a monthly premium to keep the policy active. With a term policy, if you stop paying the premium, the policy will lapse, and the benefit will cease. This is temporary coverage until you need it or can afford to pay for it.

A single parent can usually find the premium payment on a term policy within a budget they can afford. Also note that with any insurance policy, you must pass the underwriting and determine your price for the policy to be issued.

Permanent life insurance

Next, there are permanent life insurance policies. These often come with a higher cost per month premium for similar death benefits as a term policy of the same size. However, a permanent insurance policy will collect the cash value and the death benefit.

The cash value within the policy can be used or borrowed after a certain period. When you borrow money from a permanent insurance policy, you use the cash value as collateral, and the borrowing rate is relatively low.

The more permanent policy sounds appealing, but if you are worried about having the cash on hand to pay the monthly premiums, then a universal life insurance policy might be your style.

As a single parent with one income, flexibility is key. With a universal life policy, you can make more flexible payment amounts on the policy as needed. If you are considering a universal policy, it’s a good idea to work with an insurance agent to ensure you set up a policy that best suits your needs and situation.

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