The Single Parents Guide to Life Insurance (2024) (2024)

You may be financially stable as a single parent, but as the sole provider for your dependents, you also face unique challenges compared to two-parent households. You may have family members to assist you with daily tasks and other things your child needs, but often little thought is given to the long-term financial needs of your child if something were to happen to you.

Life insurance can alleviate some of these worries, but the exact amount of coverage you need depends on several factors.

• Income: A general rule of thumb is the best life insurance policy should be for a death benefit of 10 to 15 times your annual income. So, if your income is $75,000 a year, you should consider $750,000 to $1.125 million as your starting point.
• Debts: How much current debt do you have? Think about short and long-term obligations, such as a mortgage. Your life insurance policy should last as long as your longest debt and be large enough to pay it off if necessary.
• Future expenses: If you want to send your child to college or be able to pay for another large expense when they’re older, account for those when determining a policy amount.
• Amount you can afford: Some single parents struggle financially and may not be able to afford a policy with all the considerations discussed in this section. It’s possible to start with a lesser amount you can afford now and add to that coverage later.
• Other parent’s coverage:If the other parent helps support your children, that parent should have coverage, too.

When you buy a policy, share that information with family members who may be guardians to your children if you die. Tell them where to find important documents like your life insurance policy and contact information for any lawyers or financial advisors you’ve worked with.

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.

How much life insurance you need as part of your financial plan depends on the type of insurance product you buy. Your life insurance options fall into two main categories.

Term Life Insurance

Term life insurance may be best for some people, and it is the most straightforward policy of all products insurers offer. As the name implies, you buy a policy for a specified amount of time, usually 10, 20 or 30 years, and the insurer pays the death benefit to your beneficiary if you die during the term of the policy.

Term life insurance is usually cheap life insurance. You can also receive more customized coverage in the form of riders to further protect your loved ones if, for example, you develop a critical or terminal illness. Most policies also offer a conversion option to convert the policy to a whole life policy later on.

A single parent’s employer may also offer group term life insurance. This can be an option for single parents on a budget or who can’t afford a term life policy. These policies usually have lower death benefits but can still be a good option to start when you are unable to afford a higher death benefit policy.

Read more: Best term life insurance options

Whole Life Insurance

Whole life insurance provides coverage for your loved ones during your entire life, creating coverage for your financial future. It pays a death benefit when you die, regardless of age, as long as you keep the premiums current, ensuring the policy is in force.

Whole life policies are more costly than term life policies, but they come with a cash value component that is a form of savings and investment. Cash value accrues in the policy over time, and these funds can be used as an investment vehicle or a fund that the policyholder can borrow against.

You can also buy a universal life policy or an indexed universal life policy that gives you maximum flexibility when investing a part of your monthly premium. These policies may carry added risk but can also provide the greatest upside return.

Final expense insurance can also provide peace of mind to pay for burial costs and medical bills instead of putting those types of expenses on credit cards when you pass.

Read more: Best whole life insurance options

Choosing the right life insurance plan is a highly personalized decision. Consider several factors while juggling competing priorities, including budget issues.

If you’re in the midst of a divorce and on your way to being a single parent with young children, one thing to consider is building in life insurance premium payments as part of your divorce settlement. Many people overlook this in the context of bigger divorce issues, but it can be a smart long-term move.

Term coverage is often a good choice if you’re facing many short to medium-length financial obligations. As your home is paid off, college tuition is handled and other financial issues are resolved, you may not need as much coverage later in life. You can also convert to a whole life policy if you’re interested in long-term protection for your children.

Work with a financial advisor or a licensed life insurance agent to discuss all your unique factors. Their expertise can guide you to the right life insurance solution for your family.

Life insurance companies allow you to customize your coverage option with add-ons called riders.

Some riders are free, and others cost extra. Each company has different rider offerings; not all riders are available on all policies. You should also discuss riders with your financial advisor or life insurance agent.

Some of the more common riders include:

• Child term life insurance rider: This allows you to add coverage for all children, generally in small amounts, for an additional premium cost. Term coverage is often convertible to a permanent life insurance policy when the child reaches a certain age.
• Accelerated terminal illness rider:This rider is also called an Accelerated Death Benefit rider (ADB) and is often included at no charge with many life insurance policies. This rider allows those diagnosed with a terminal illness to collect a portion of the death benefit while they are still alive.
• Critical illness rider:This is similar to a terminal illness rider, except the policyholder does not need to be diagnosed as terminal to collect a portion of their death benefit. It covers chronic illnesses and diseases such as cancers, severe diabetes or debilitating diseases as diagnosed by a qualified medical professional.
• Accidental death and dismemberment rider:If you die due to an accident, your beneficiaries can be awarded an additional policy death benefit, often an additional 25% payout. Some riders also provide an additional benefit coverage amount for dismemberment, such as the loss of a limb, with a specified cash benefit paid depending on the nature of the injury.
• Term conversion rider:A policyholder can convert a term life insurance policy to a whole life policy for a specified period without undergoing a life insurance medical exam.
• Waiver of premium rider:If a policyholder becomes disabled and can’t work, this rider pays premiums so that a policy can remain in force.
• Guaranteed renewability rider:Most term life insurance coverage guarantees you can renew a policy on a year-to-year basis after your term expires.
• Paid-up additions rider:This can increase the accumulation of tax-deferred cash values and death benefits by purchasing paid-up additional insurance to supplement non-guaranteed cash value and death benefits.
• Renewable term rider:You may need added coverage at specific times, such as when your children are young or you have a large mortgage. People sometimes use a renewable term rider to buy shorter-term coverage to guard against these added layers of need.

After you decide on a policy type and amount, you’ll need to identify a beneficiary (or beneficiaries). Many parents want to make their child the beneficiary of their life insurance policy. However, minors can’t legally accept life insurance money, potentially causing the death benefit payout to get stalled in legal proceedings.

A better way to set up a payout is to create a trust and name it as your beneficiary. You can specify how the money is distributed, how much is spent and what it can be spent on, and a trustee will carry out your wishes, including caring for your children if appropriate. Trustees may include grandparents, a policyholder’s siblings, an attorney or a close friend.

Depending on the type of policy you choose, you may get coverage in as little as a day with some term policies that require minimal medical information. Other policy types may require more medical records and an exam, as well as other detailed information about your health history, lifestyle, type of job you have and other factors. In these cases underwriting could take four to six weeks.

When you buy a policy, read it thoroughly to understand how your child is protected. If you have questions, ask. Put the policy in a safe place and ensure someone knows it is in force and where to find it.

You should also review the policy every couple of years or when a major life event occurs, such as when you get a bump in compensation or a guardian or trustee passes away, to ensure coverage is still appropriate for your current circ*mstances.

As a single parent, you have a lot of things to juggle, including your daily living demands as well as long-term expenses, financial goals and protection for your children. Buying life insurance is one way you can provide this protection if the unimaginable happens.

Term life insurance can be an option for many single parents because term policies are flexible, easy to understand and affordable. Permanent life insurance, while more expensive, can be a viable option that provides cash value, higher death benefits and added flexibility.

The best way to decide which type of policy and amount are suitable is to talk with your financial advisor or a licensed life insurance agent to help you make the right choice.