Single parent life can make it difficult. What happens if you can’t take care of your children anymore? You may feel more secure knowing that your children will be taken good care of in the event of your death if you have a insurance policy.
Earl Jones, the owner of Earl L. Jones Insurance Agency (a division of Farmers Insurance), stated that “life insurance for single parents” is vital. Single parents have many options when it comes to providing for their children and themselves with life insurance.
Life insurance can be a difficult decision for single parents. It is important to choose the best life insurance company that suits your family’s needs.
Single parents should have life insurance
Life insurance is a great way to protect your children as a parent. If you are unable to support your child financially, life insurance can help protect their financial future.
Brendan O’Brien is a financial advisor and life insurance expert at Prudential Advisory. Single parents require life insurance to cover their children’s future expenses in the event of their death. He explains that this includes basic needs such as food, shelter, and clothing. “Life insurance is designed to replace income and eliminate any debts left behind by the deceased parent so that their child can reach financial independence.
If your loved ones suddenly become without you, life insurance can provide a financial cushion.
Types of life insurance available for single parents
Single parents may find life insurance to be a good option. Both permanent and term life insurance have attractive qualities that may make them attractive choices.
Term life insurance
Term insurance refers to a type of life insurance that lasts a certain amount of time, typically 10-30 years.
Michael Shea, a certified financial advisor and advisor to Applied Capital says that term life insurance is a great option for single parents. A term policy should be easy to obtain if you are young and healthy. This will keep you covered until your children become financially independent.
Because term life insurance is short-term, it tends be cheaper than permanent life policies. However, term policies do expire. Although you can usually renew term life policies, premiums will be increased based on your age. Your payments will likely go up with your age when the policy is renewed.
There are many types of term life insurance policies. Here are a few:
- Level-term life insurance The policy’s death benefit remains the same throughout its term.
- Decreasing your term life insurance: If you anticipate that your debt will decrease, decreasing term life insurance might be a good choice. The death benefit is lower and you have less coverage over the years.
- Guaranteed renewable term insurance
While term life insurance is a great option, permanent life insurance might be something you want.
Permanent life insurance
Permanent insurance policies will remain in force for as long you live, provided you continue to pay the required premium. Permanent policies can build up cash values over time. These can be borrowed against, or withdrawn under certain circumstances. Permanent life insurance is usually more expensive than term insurance because it covers the entire life of your family.
Permanent life insurance can be divided into two types. However, each type has its own subtypes.
- Whole life insurance This is a very simple type of life insurance. As long as you pay your premiums, the policy will last for your whole life. Policies that cover whole lives typically have cash value and a fixed interest rate.
- Universal life insurance This universal life insurance offers a high level of flexibility in your life insurance. You might have the ability to adjust your death benefit and premium amount. Universal life accumulates cash value as well, though the interest rate can vary depending on market conditions.
Mark Charnet, founder and CEO of American Prosperity Group, suggests that single parents might consider an overfunded fixed-index universal life insurance policy. These policies can be purchased from top-rated insurers. They are savings options that offer the potential to grow tax-deferred and provide a parent with an income tax-free in retirement. This policy is also eligible for children’s education. It will not affect their eligibility for financial aid. The best time to use this program is when college costs are between 12-15 years and beyond. However, it can be useful in less desirable situations.
Sam Price, broker at Assurance Financial Solutions discusses the differences between term and permanent life insurance. He explains that permanent life insurance is a good option for single-parent households as long as they have enough income. Term life insurance is better if parents have a tight budget and struggle to make ends meets. If income is not a concern, permanent life insurance may be an option.
You should consider your financial goals before you make a decision about which type of life insurance policy you will purchase. Also, think about how your life insurance will function. A financial planner or licensed insurance agent may be a good idea.
Choosing a death benefit amount
When you decide how much insurance you will need, it is important to consider how long you plan to provide your family with an income replacement. Also, consider your mortgage and how much debt you have. You may also consider long-term costs such as college tuition. You might also consider funeral expenses or financial gifts that you wish to leave to your family members or charities.
O’Brien provides a real-life example, using a parent earning $100,000 annually and having a $300,000.00 home mortgage. O’Brien suggests that a $500,000 policy would cover the mortgage, and $200,000 would be available for child care expenses. An insurance policy that covers 20 years would cover the parent until the time the child reaches adulthood.
O’Brien also suggests an alternative scenario. He says, “If the child was older at the time, for example, 16 years old, the mortgage would be less, perhaps $50,000, but higher education would be more urgent.” In the absence of their primary caregiver, the child would have $450,000 to help pay for education and living expenses.
Before making a decision, it is important to discuss your financial situation with an agent who specializes in life insurance.
Deciding on beneficiaries
You can choose a beneficiary to receive your policy payouts if you die when you buy a life insurance policy. There are many options available for beneficiaries. There are many beneficiaries you could choose from.
- Your children: Although it may seem obvious to name your children as beneficiaries, it can be risky. The majority of life insurance companies cannot pay minors. You would name a legal custodian (perhaps one of your grandchildren ) to receive the death benefit until your children turn 18.
- You may wish to name a caretaker for your children if they are still young. To ensure everyone is clear about the agreement, you might discuss the possibility with your insurance company.
- A trust: An attorney may be able to help you set up a trust for your kids. The trust would become the beneficiary of your policy, and would control your money according to your instructions.
Financial planners and life insurance agents may be able help you select a beneficiary to your life insurance policy.
Questions frequently asked
What is the cost of life insurance?
The cost for life insurance is dependent on your particular situation and the type you require. Your premium will be affected by your age, health, hobbies, and the coverages you select. You may find the best life insurance quote by comparing quotes from different companies. You might be able talk to your agent about changing your coverage if you have life insurance.
Which type of life insurance is best for single parents?
Single parents have different life insurance requirements. While term life insurance is a good option for some people, it may not be the best choice for others. A permanent policy might be more suitable. You can talk to an agent about your financial goals before you decide on a type or life insurance.
