Life Insurance for Single Parents: What You Need to Know

​According to the 2017 Insurance Barometer Study by Life Happens, only 60 percent of respondents agreed that single parents of young children need life insurance. On the other hand, 82 percent of respondents said married couples with young children need life insurance protection.1
 
Single parents often may be in greater need of life insurance protection than couples are. That’s because a single parent could be the primary or even sole provider for the child. If you pass away, there may be no one to support your child from a financial perspective. Even if the other parent or family members will take your child in, they may not have the financial means to provide adequate care.

Life insurance solves that problem. The death benefit can be used to provide sufficient care for your child and to provide him or her with financial security. Your financial professional can help you determine the correct amount and type of life insurance for your needs. In the meantime, below are a few tips to get you started:

Base your coverage amount on specific needs.
Many people base their life insurance protection amount on a simple formula, such as a multiple of their earnings. However, the better approach is to calculate your coverage based on your specific needs. Think about how your benefit would be used, and then estimate an amount needed to fund those goals.

For example, you may want to leave an amount to fund your child’s education. You might want to leave enough money to cover a certain number of years’ worth of expenses for the child’s guardian. Perhaps you want to leave a lump sum for your child to use when they become an adult. Again, your financial professional can help you identify and clarify these priorities so you can get the right coverage for your situation.

Consider your beneficiary carefully.
At first glance, it may seem like your child should be the beneficiary on your policy. After all, the coverage is for his or her benefit. However, you may not want to leave the money directly to your child, especially if he or she is very young.
 
Many life insurance companies won’t pay out a death benefit directly to a child. That means the money would instead go to the child’s guardian, who may or may not use it for their benefit. Instead, consider establishing a trust for your child and then making the trust the beneficiary of the life insurance. Your trust’s executor would manage the funds to make sure they’re used as you intended.

Don’t rule out permanent insurance.
Term insurance is popular among parents because it’s relatively inexpensive compared with permanent alternatives. It’s possible that term insurance could be the right solution for you. However, you may also want to consider permanent policies.

Most permanent policies have a cash value component that allows some of your premium dollars to accumulate on a tax-advantaged basis. Later in life, after your child is grown, you can possibly tap into those accumulated funds to cover retirement expenses or other financial goals. Work with your financial professional to explore all your options and see what fits in your budget.
 
Ready to develop your life insurance protection strategy? Let’s talk about it. Contact us today at First Fidelity Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.


 
1https://www.nerdwallet.com/blog/insurance/life/single-parents-guide-life-insurance/
 
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