What type of life insurance do single parents need?
If you’re a single parent, life insurance is a valuable tool that can support your child’s financial future. Balancing your unique needs and priorities with the many different coverage options available can make it difficult to find the right policy—especially when you’re busy with school pickup, after school sports and activities, and helping with your child’s homework. In this article, we’ll guide you through the details of purchasing life insurance as a single parent.
How much life insurance coverage should a single parent have?
Life insurance provides a safety net for your child in the event you were to suddenly pass away, supplying funds to cover everyday expenses, education and ongoing care. The amount and type of coverage you’ll need as a single parent will depend on you and your child’s financial situation. When thinking about how much life insurance to purchase as a single parent, you’ll want to account for:
The cost of your mortgage and any other debt
The cost of replacing your annual income for the amount of years your child will need it (a general recommendation is to account for at least seven years of income)
Long-term expenses, such as college tuition
Comparing these factors against your existing savings will help you decide how much life insurance to buy. You’ll also want to consider what type of policy is right for you. There are two main types of life insurance, term life insurance and permanent life insurance. Term life insurance provides coverage for a specific length of time, typically a 10-, 15-, 20-, 25 or 30-year term. Permanent life insurance has no pre-set expiration date, so it provides coverage for your entire lifetime.
Who should be the beneficiary of single-parent life insurance?
As a single parent, the beneficiary of your life insurance will typically be your dependants. Keep in mind that life insurance claims can’t be paid out to minors, so you’ll want to name a custodian to manage your benefits in the event of your passing. This ensures your child will be taken care of financially until they turn 18 when they can legally take over the management of beneficiary funds.You can also work with an attorney to set up a trust and name the trust as the beneficiary of the life insurance policy. When you do this, you can specify the rules and details for how your life insurance money is to be used. You’ll also name a trustee to manage the funds according to your instructions. Your child will then receive any unspent benefits when they reach adulthood, or when they reach a predetermined age that you specify in the trust.In the event that you pass away without naming a custodian or trustee, the court will appoint one on your behalf. Setting up a custodian or trust gives you extra reassurance that your benefits will be managed appropriately.
Need help deciding on the right life insurance as a single parent? Let SelectQuote help you make the right decision for your family.
Having life insurance as a single parent can help you safeguard your child’s financial security, but we know deciding on the right policy and coverage can be complicated. At SelectQuote, we take the time to get to know your unique situation, so the policies we find on your behalf are better suited to your needs. We search dozens of trusted carriers in just minutes, saving you time to focus on what matters most: your child.
