Life insurance for single parents
Life can be tough as a single parent. Without another parent to step in, what happens when you are no longer able to care for your children? If you have a life insurance policy in place, you may be more reassured that your children will be taken care of if you die.
“Life insurance for single parents is paramount,” says Earl Jones, owner of Earl L. Jones Insurance Agency, a division of Farmers Insurance. “Life insurance gives single parents many options to support themselves and their children. “
For single parents, life insurance is an important decision. Find the best life insurance company For your family’s needs, choosing the right type of policy, deciding the amount of the death benefit, and choosing beneficiaries are all important steps in your financial plan.
Why Single Parents Need Life Insurance
As a parent, life insurance can be one of the best protections you can offer your child. Life insurance can help protect your children’s financial future if you are no longer able to support them.
Brendan O’Brien, a financial planner and life insurance expert with Prudential advisers, offers an explanation. “Single parents need life insurance to cover their children’s future expenses if they die. This includes the basic necessities of food, shelter and clothing, ”he explains. “Life insurance is intended to replace income and to offset any debt left by the deceased parent before their child reaches the age of financial independence.”
Life insurance can be a lifeline that your family may need if they suddenly find themselves without your support.
Types of life insurance for single parents
There are many types of life insurance these can be good options for single parents. Term life insurance and permanent life insurance both offer qualities that could make them attractive choices.
Term life insurance
Term life insurance is a form of life insurance that lasts for a specified period, typically 10 to 30 years.
“I am a huge fan of term life insurance for single parents because it is relatively inexpensive,” says Michael Shea, certified financial planner and advisor for Applied capital. “If you are young and in good health, you should have no problem purchasing a term policy to insure yourself until your children are adults and are not financially dependent on you.”
Because term life insurance is term, it tends to be more affordable than a permanent life insurance policy. However, temporary policies expire. You can usually renew term life insurance policies, but you will pay a new premium based on your new age. This means that your payments will likely be increase with age when you renew the policy.
There are several types of term life insurance policies. Some of them are:
- Term life insurance level: Level term life insurance keeps the same amount of death benefit throughout the life of the policy.
- Decreasing term life insurance: Decreasing term life insurance can be a good option when you anticipate your debt will decrease over time, as the death benefit goes down and gives you less coverage over time.
- Guaranteed renewable term insurance: This type of term life insurance policy always has an expiration date, but there is an automatic renewal option as well.
While term life insurance can be a good option, there is another type of life insurance you can consider: permanent life insurance.
Permanent life insurance
Permanent life insurance policies remain in force for as long as you are alive, assuming you continue to pay the necessary premium. Permanent policies can accumulate cash value over time, which can be borrowed or withdrawn under certain circumstances. However, since it lasts your entire life, permanent life insurance is generally more expensive than term life insurance.
There are two main types of permanent life insurance, although each type also has subtypes:
- Whole life insurance: Whole life insurance is a relatively simple type of life insurance. The policy lasts your life, as long as you keep paying the premiums. Whole life insurance policies generally pay a cash value at a fixed rate of interest.
- Universal life insurance: Universal life insurance offers a level of flexibility when it comes to your life insurance. You may have the option of adjusting your death benefit or the amount of your premiums. Universal life insurance also accumulates cash value, although the interest rate may vary depending on the market.
“For single parents, an overcapitalized fixed index universal life insurance policy might be a good idea,” suggests Mark Charnet, Founder and CEO of American prosperity group. “These policies are available from many insurance companies and are savings options that have the potential to generate a rate of return comparable to the stock market without the risk of loss of capital and can grow tax-sheltered while providing the parent with non-taxable income at retirement. This policy can also be used for the education of a child and will not be taken into account in their request for eligibility for financial assistance. This program works best when university expenses are at least 12 to 15 years old, but can still work well in a less desirable scenario.
Sam Price, owner and broker at Insurance financial solutions, explains how to choose between permanent and term life insurance. “For single-parent households, permanent life insurance can be a great tool as long as there is enough income to make it worth it,” he explains. “If parents are on a budget and are struggling to make ends meet, term life insurance will always be more appropriate. But if income is not an issue, then permanent life insurance can be a great addition to the financial plan.
Before deciding what type of life insurance policy to buy, you may want to consider your financial goals and how you want your life insurance to work. It may be helpful to speak with a licensed insurance agent or financial planner.
Choose a death benefit amount
When you decide how much life insurance you need, you may first want to decide how long you want to provide your family with an income replacement. You may also want to consider the amount of your debt, including your mortgage. Any long-term expenses, such as tuition, could also be factored into your decision. Finally, you could take into account funeral expenses and financial donations that you want to leave to loved ones or to charities.
O’Brien provides a real-life illustration, using a parent with an annual income of $ 100,000 and a mortgage loan of $ 300,000. O’Brien speculates, “Based on income and debt, a term policy of $ 500,000 would pay off the mortgage and provide $ 200,000 for the expenses of the child in the care of another. A 20-year term insurance policy would suffice to insure the parent until the child reaches adulthood.
O’Brien also offers another scenario, dreaming: “If the child was older at the time of death, say, at 16, the mortgage would be lower, maybe $ 50,000, but now the needs of higher education would be more urgent. The child would have access to $ 450,000 to pay for his education and help cover living expenses in the absence of his primary caregiver.
Since the death benefit of a life insurance policy is the financial protection in the event of death, you may want to review your situation with a life insurance agent before making a choice.
Decide on beneficiaries
- Your children: Designating your children as beneficiaries may seem like an obvious choice, but it can be risky. Life insurance companies are generally unable to make payments to minors. In this case, you would appoint a legal guardian, possibly one of your children. Grand parents, to be responsible for the death benefit until your children are of legal age.
- A guardian : If your children are young, you may want to leave the money with their designated guardian. You may want to discuss this option with your insurance company and with the person you intend to leave the money to, to make sure everyone involved understands the agreement.
- Confidence: A lawyer can help you set up a trust for your children. In this case, the trust would be the beneficiary of your policy and would be responsible for controlling your money in the way you specify.
Life insurance agents and financial planners may be able to help you choose a beneficiary for your life insurance policy.
Frequently Asked Questions
How much does life insurance cost?
the cost of life insurance depends on your particular situation and the type of protection you need. Your age, health, hobbies and the coverage you choose all have an impact on your premium. Get life insurance quote several companies can help you find the company that best suits your situation. If you already have a life insurance policy and find an option that better suits your needs, you may be able to discuss it with your agent. change cover.
What is the best life insurance for single parents?
The life insurance needs of single parents vary from family to family. While term life insurance may be a great choice for some, a permanent policy might better meet the needs of others. Before choosing a type of life insurance, you might want to discuss your goals for your family’s financial future with an agent, who may be able to help you make a decision.