Life insurance for single parents
Life insurance is a must for anyone with dependents. Not only can it help ensure that funeral costs and lingering medical bills are covered, but life insurance also provides financial stability for children or spouses if you pass away.
Single parents face additional stress when it comes to life insurance, particularly if the child’s other parent is no longer in the picture. Without another parent to support the child, the financial safety net life insurance provides becomes particularly important.
However, many single parents go without life insurance — according to a March 2011 study from Genworth Financial, 69 percent of single-parent households with children in the home are without life insurance. For comparison, about 45 percent of married parents with children in the household don’t have life insurance. Worse yet, according to the study, the more children a household has, the less likely the household is to have life insurance.
There are many reasons single parents often do not have life insurance. According to the Genworth study, many parents who participated in the study cited lack of time or cost as the main reasons for not purchasing a policy. Without another parent to help out, getting coverage requires time and money that single parents often don’t have in their schedules or wallets.
Preparing for the worst
When married couples buy life insurance, they often plan with the possibility that one spouse will remain behind to care for the children if the other dies. That’s not the reality many single parents face. New York Life recommends that single parents consider the following when making life insurance plans.
- Get enough insurance to cover your lost income, child care (if your children are young) and your children’s education. College alone can cost tens of thousands.
- Even if the other parent isn’t paying child support, ask about his or her life insurance coverage.
- Choose a guardian for your children with care, and make sure that potential guardian understands the legal and financial realities of that responsibility.
- Consult a professional to draft a will. Your verbal wishes will have no legal standing after you die.
When looking to cut costs, life insurance policies often are one of the first things families cut from their budgets. Once you stop making payments, your policy will lapse, and you’ll no longer be covered. If you are a single parent and can’t afford to pay your life insurance premiums, consider these options provided by the Insurance Information Institute:
- Cash out your policy. This is an option only if you have a whole life insurance policy (as opposed to a term policy). You no longer will have coverage, but you will get the cash savings that have accrued over the life of your policy. Put it in an interest-bearing account to get the best return available.
- Convert the policy. Whole life insurance policies are often more expensive than term policies are. You may be able to convert your whole life policy into a term policy and use the cash savings to pay some of your premiums.
- Let the policy lapse. In some cases, insurance companies will allow you to reinstate your policy within five years. This may be a good option if you think your financial stress is temporary.
If you’re a single parent, your children rely on you alone. While no one wants to think about death, proper preparations are crucial to make sure your children are well cared for if the unthinkable does happen.