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Jul 6, 2021·6min

Single Parent Life Insurance: Here's What You Need to Know

Single-parent families have a lot on their plate, so they might not think about things like life insurance. However, covering yourself with a policy can be beneficial for both you and your child. But how can single-parent life insurance help? We've put this guide together, covering the ins and outs of getting a policy as a single parent.

Single living

Raising children is hard enough with two parents, but it's even more difficult when it's just one. Yet the United States has the world's highest percentage of single-parent families, with 23%t of homes having just one parent.

Running the household with little to no help is a lot of pressure. And while we don't want to put a downer on things, imagine how much worse it would be if you were no longer around? That's why purchasing a life insurance policy can be a savvy move, safeguarding you against the unexpected.

Getting covered offers protection should the worst happen, but there’s more to it than that. Some policies contain benefits that you can access while you’re still alive, which you can even use to send your child to college. In fact, there are quite a few benefits if you get single-parent life insurance. Here’s everything you need to know.

What single parents should know about life insurance

Anyone with dependents should consider getting life insurance, but it’s arguably even more important for single parents. Married couples tend to plan their policies on the basis that one parent will still be alive to look after the children, but single parents don’t have that luxury.

Therefore, a life insurance policy can be helpful and add an extra layer of security to bringing up your child. As a single parent, you can get enough to cover lost income, child care, and the cost of their education.

You will also need to think about a responsible guardian who will be tasked with caring for your children. A trustee is necessary, too, as minors can't receive life insurance death benefits, and the trust will ensure that all benefits are distributed based on your instructions.

It might also be worth setting everything up so that your children have full control once they meet the legal age. Fortunately, life insurance is fully customizable, so you can shape it to suit your children’s needs.

What type of single-parent life insurance should you get?

Ok, so it all got a bit deep there–no one wants to think about what might happen to their children should they not be around. But life insurance can go some way to mitigating those worries, setting your kids up financially in the process. Now you just need to settle on the right type of policy.

Is it covered at your job?

Many employers offer life insurance as part of their employee package. This is typically referred to as group life insurance. While a group policy can be helpful, alone, it's probably not enough to cover all your needs. Most group life insurance policies are usually capped at $50,000, or a percentage of your salary, and you need to go with the employer's insurer. Therefore, you might want to top up your coverage with a personal policy even if you're covered through work.

Term

A term policy may intrigue single-parents who just want to cover their children until they reach adult status. Term coverage lasts for a specific amount of time–usually anywhere between five and 30 years–and pays out via a death benefit should the worst happen while you’re covered. Once the policy ends, however, you don’t have anything to show for it, and you’ll need to pay higher premiums if you want to renew as you would have aged since the initial policy.

Permanent

Taking out permanent coverage is initially more expensive than term, but it lasts for as long as you keep paying the premiums and gives you benefits while you’re still alive. Suddenly, the conversation switches from “how do I protect my child if I die” to “I’ve got protection in case the worst happens, but can also benefit along with my child while I’m still alive.”

So how does permanent life insurance help you while you’re still alive and kicking? Allow us to explain.

Benefits of getting single-parent life insurance through a permanent policy

Cash value

Permanent life insurance has a cash-value element to it which acts as an investment account and accrues wealth over time. When you pay into your premium, you're essentially paying into two pots: cash value and death benefit. That means both grow over time, and you can tap into the cash value later in life. Therefore, you could potentially use it to send your child to college or just buy yourself something nice.

Tax-free

Not only is there a cash-value aspect to permanent life insurance, but it's also tax-free. Unlike other savings accounts, you won't incur any tax when you withdraw the money. That's because it's taken in the form of a zero-interest loan against yourself, one that's repaid through your death benefit when you pass. However, the death benefit increases throughout the time you pay into it, meaning there will still be plenty to leave to your children.

Locked-in premiums

Because permanent life insurance is, well, permanent, you only pay one premium. As a result, your premiums will be the same at 25 as they are at 55. So not only can you lock in the premiums as a single parent, you can enjoy more favorable rates if you get life insurance in your twenties. That's a win-win.

Critical care

You can customize your permanent life insurance policy, adding riders like early access to your death benefit if you fall seriously ill or injure yourself and are unable to carry on working. If such scenarios were to occur, you wouldn't face any financial burden and would be able to carry on with your previous earnings, which could be beneficial to both you and your child.

In conclusion: single-parent life insurance

You need to cover many bases as a single parent, and one of them should be life insurance. Fortunately, there are plenty of options out there to get the best coverage for you and your child, including a permanent policy that could see you and your children benefit while you’re still alive. Now, that’s much more positive than thinking about the worst-case scenario, isn’t it?

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