No ones likes to talk about it. I’m a firm believer in thinking positive. It’d be ideal if we all lived long, happy lives. But what if that doesn’t happen? What if you die sooner rather than later? Have you taken the time to plan for how your family would survive financially if something happened to you?
This is important in any situation, but doubly important if you’re a single parent. Many single parents don’t have a “fallback” plan for if they can’t be around to take care of their kids. Do you?
Do you have a plan for your kids’ financial security should something happen to you. As a single parent, your kids need you in a different way. There’s often times no other parent to cover financial or other needs if you die. For this reason, you need to be extra certain you have some type of a financial plan in place that will take care of your children’s monetary needs if something happens to you.
One of the smartest things you can do as a single parent is get life insurance. That way your children’s financial situation will be secure in case anything unexpected should happen to you.
Read on to discover three critical reasons single parents need life insurance. Then make your own plan for securing your children’s financial future in the event of your untimely death.
This article was sponsored by SelectQuote, but all thoughts and opinions are my own.
Why Single Parents Need Life Insurance
Single parents are often in the greatest need of life insurance. This is because there’s no other person there to assume the financial responsibilities the single parent would leave behind in the case of something unexpected.
A 2011 study found that 69% of single parents with children living in the household were uninsured. This is compared to a 45% uninsured rate for married parents with children living in the household. That’s a pretty sobering statistic.
As a single mom of three kids, the thought of an untimely death weighs heavily on my mind. I don’t have a spouse to pick up any slack. While being a single parent is tough work in and of itself, there’s also the fact that I am the sole financial provider for my children.
I think about the everyday cost of raising three kids. Raising children is not cheap. I’d hate for my extended family to be financially stressed by raising my kids if something happened to me.
The impact of those stresses should be on your mind too if you are a single parent – or even if you’re not.
Life would be tough enough for your kids and loved ones if you met an untimely death. Don’t place the added burden on them of having to figure out how they’re going to cover the financial expenses of doing so.
Having life insurance is a way for you to help ensure your extended family or loved ones would have the financial supply necessary to care for your kids if need be. That insurance – if needed – would help fund three crucial costs that would need to be covered if something unexpected happened to you.
1. Funeral Expenses
Did you know that the average funeral costs over $7,000? That’s quite a burden to leave your family!
Most people think about the the costs of a casket, a headstone, and a grave site. However, there are also fees charged by the funeral home for the service and preparing the body. Choosing cremation can save money, but the average cost is still around $3,000.
The varying costs for covering a funeral and burial can add up rather quickly. In addition, it’s tough to be thinking about frugality when you’re putting a loved one to rest. Don’t place that burden on your children or on your extended family. Instead, get an adequate life insurance policy in place.
Having an adequate life insurance policy would help ensure your family has enough money for all of the costs associated with a funeral and burial. Most experts recommend budgeting at least $10,000 to cover your final expenses.
And $10,000 is a lot of money. A life insurance policy that is large enough to cover these final expenses will ensure your family is not burdened with the cost of your death. They’ll have enough emotional burden as it is. Ensure they can afford proper burial costs by obtaining a life insurance policy.
2. Debt and Financial Obligations
Do you have any debt?
Think about what you owe on any credit cards and student loans. What about a car loan or mortgage?
When you are single, there’s no other person there to assume these debts in the event of an untimely death. Yes, you may have a co-signer on some or all of these loans. Someone such as a parent who signed on the loan with you in order to secure financing. But would they be put in a difficult place financially by being obligated to take over your debts?
And should they have to? If someone cosigned on a loan or mortgage for you as a favor, don’t place the burden on them to pay back the loan.
Assets Aren’t Always Assets
You might think that assets such as your house or car will be easy for your family to take care of. Just sell them, get the cash and move on, right? However, even selling your assets is not without expense. For example, there are commissions for realtors when you sell a home. And there are the expenses that exist until the house is sold.
As an example, if your extended family decided it was best to sell your home, it may take months to sell. Who’s going to pay the several months of mortgage payments, utility bills, and property taxes while it is on the market?
Also, do you have enough equity in your home to cover the costs of selling? Listing and selling realtors will typically take between 6 and 7 percent of the sale price of your home. In addition to that cost, you have to consider any transfer taxes, possible repairs, and closing costs/concessions. These costs can add up quickly and eat up a large portion of any equity you might have in the home.
In addition, what if you meet your untimely death during a market downturn? The real estate crash of 2008 saw housing values drop by nearly 30%. That means if you had a $300,000 house, it would be worth just over $200,000 in the event of a similar crash.
How would that change your financial picture? Would you still have equity in your home, or would you be upside-down on your mortgage? This is one major reason why life insurance is so important. You can’t predict the financial future of America’s economy, but you can do something to protect yourself from its effects.
If you have other debts, your loved ones may be responsible for paying those off as well. For example, what about your car? Do you have equity in the car? More people are choosing lower down payments and longer terms for their auto loans. This means there is a greater possibility of being upside down on your loan. Who will make up the shortfall and pay off the bank when they sell your car?
Additionally, let’s say you have consumer debt such as credit card debt. Any credit card debt would have to be paid by your estate, leaving less money for future living expenses for your kids. That means that any money you have in savings or in equity in your home would likely need to be used to pay your debts first.
If you have those obligations, that leaves less money left over for caring for your kids’ daily expenses and unexpected expenses.
These are just some of the topics you should think about if you’re a single parent. There can be significant costs associated with selling your assets and life insurance is a great way to help financially protect against those costs.
3. The Costs of Raising Your Children
As a single parent, have you given thought to who would raise your kids if you passed away? This is an important decision. You’ll want your kids to be raised by a loving and responsible person who has the capability to provide for their many needs.
However, you’ll also want to think about the financial stability of your children. Will the caregiver you choose be able to financially support your children in addition to any of their own? If your children are young, what about the added cost of childcare?
In many families these days, there aren’t adequate finances to take on raising several additional children. In my case, I’d ask my sister to take over raising my children if something happened to me. And although my sister has a child of her own and is used to spending money on child-rearing, adding my three kids would be a financial stressor. Not only are there everyday costs such as food and clothing, but she’d also likely need a bigger home as well.
Is the home of the person you’ve designated as caregiver for your children in the event of your death big enough? Can it house your kids and any kids your designated caregiver may currently be raising?
Or, would the addition of more kids require a move to a bigger home?
It’s important to think in a big picture way about these types of costs that would be necessary for the person you’d expect to take over raising your children. In additional to general costs of raising your children, you might want to also think about education costs.
What About Your Kids’ Education Costs?
According to this report by College Board, the average cost of a college education for the year of 2017-2018 in the U.S. can be between $9,970 and $25,620 per year. Those costs can add up quickly, especially if you have more than one child.
Even if you are regularly contributing to college funds for your children, what happens if you pass away? The kids might be years away from a fully funded college account. By purchasing adequate life insurance, you’d have the extra funds you need to ensure your children’s college costs are covered no matter what.
And what about their primary education? Are they going to a private school? Would you want to keep them in that private school should something happen to you? That costs money over and above what most families have to spare. An adequate life insurance policy could help cover those costs.
And don’t forget about other miscellaneous costs related to raising your kids. Are they involved in sports or other extracurricular activities? Do they have pets? Do they like to travel and go on family vacations? Having an adequate life insurance policy can be vital in covering daily living costs as well as other costs such as college expenses.
Life insurance proceeds are a great way to ensure your extended family members or other loved ones can financially support your children if something happens to you. This gives everybody one less thing to worry about in the event of your unexpected death.
Just think how comforted they would be knowing that money won’t be an issue in the face of a catastrophe. You’ll want your children’s lives to change as little as possible if, God forbid, they ever have to deal with losing you. Having enough money via an ample life insurance policy will help ensure not everything will change in their lives.
Your Life Insurance Options
Now that I’ve given you plenty of reasons to get life insurance, you might be wondering what type of life insurance to purchase. There are two main types of life insurance you can buy: Term life insurance and whole life insurance. Here are some details on the difference between the two.
Whole Life Insurance
Whole life insurance covers you for your entire life. If you purchase a whole life insurance policy when you’re 30, it will stay in effect until you die – even if you die at 85 or 90. That might sound like an enticing option, however, whole life insurance is typically quite expensive.
As a single parent, you’re probably not interested in spending more than you have to on life insurance. However, there’s another option: term life insurance.
Term Life Insurance: An Affordable Option
What is term life insurance?
Term life insurance pays a benefit if you pass away during the term covered. A term life insurance policy can usually be found for 10, 15, 20, or 30 years. So, if you purchase a 20-year policy when you’re 30, it will stay in effect until you’re 50. While this might seem like not enough time, it will cover your kids’ expenses until they reach adulthood. At that time they have the ability to support themselves, in most cases anyway.
Term policies are a great life insurance option for when you have children. And since they only last for a specified term, the policies are often much more affordable than a whole life insurance policy would be.
Another great thing about term life insurance is that you can choose a term that corresponds with how long you will want to have the protection of life insurance. For example, you can purchase the insurance to cover costs until your children are grown and/or finished with college. Your life insurance needs will be different once your children become adults. At that time you can revisit which term or type of life insurance policy is best for you at that time.
This is especially important if you have children that might not be able to be self-dependent as adults. There’s another option to cover you after you’ve reached the end of your term life insurance policy too. And that is by becoming self-insured.
There’s a term in the personal finance world called “self-insured”. You’re considered self-insured if you have enough money in savings and investments to cover your family’s financial needs over an extended period of time in the case of your untimely death. In other words, you have enough in cash and investments that you don’t need life insurance.
Being self-insured is the ideal scenario for a parent. And you can build toward that by increasing your savings balances and decreasing your debt balances. I wouldn’t necessarily count your house as a part of those assets. Due to housing value fluctuations and the fact that your kids may not want to move if you die, you should become self-insured through savings and investments.
However, until you reach that point you may want to strongly consider purchasing a term life insurance policy.
Becoming self-insured is generally a long-term process that takes a decade or more to achieve. Saving enough money – usually in the hundreds of thousands of dollars – to become self insured takes time and discipline.
In the interim, it’s important to have a back-up plan. You need a plan that will cover your kids’ or families financial needs if you can’t.
Shopping for Life Insurance
Ready to protect your loved ones? Take the time to look into your life insurance options. There are dozens and dozens of life insurance companies out there. But how do you know which one is right for you? And do you have the time to look into each and every one, making phone calls and writing down policy terms and conditions?
I’m guessing you don’t. You’re a busy parent with a lot on your plate. But SelectQuote can help.
SelectQuote shops for the best life insurance premium prices from the 12 trusted companies they represent. SelectQuote has been in business for over 30 years and is America’s #1 term life insurance agency. They’ve got the experience and the connections to help you get the best life insurance policy for your situation.
To get started with a quote, you can go online and answer a few simple questions (age, height/weight, and some basic medical information). You’ll get a confirmation email and an agent will call you back to discuss the best option for your needs.
If you want to talk to someone right away, you can also call 1-800-670-3213 for your free quote.
Single or married, getting life insurance is an important step for parents to take. Call SelectQuote today for more information on term life insurance policies and how they can help keep your family safe. This is one financial move that can’t wait. Your kids and extended family deserve to have the best plan out there to protect them if something should happen to you.
How Much Life Insurance Should You Have?
You might be wondering how much life insurance you should have. The answer to that question varies. A common math solution that will help you answer that question is to determine your family’s annual expenses and then multiply that number by 20. So if you spend $60,000 a year raising your kids, you should have $1.2 million in life insurance.
However, you also have to take inflation and additional costs such as college into consideration. It might be wise to meet with a trusted and knowledgeable financial advisor to determine how much life insurance you need.
Having a life insurance policy is important for every parent. However, for single parents it’s even more crucial. Your children depend on you and you alone to provide for their financial and other needs.
Even if their other parent is in the picture, they might not be providing for your kids’ future with life insurance policies of their own. Or, they might not be willing to take on the responsibility of raising your kids if something happens to you.
Things change and attitudes change. Don’t leave your kids without financial protection if you as their primary caregiver around around to provide that protection. Instead, research the various life insurance options. Call an agency like SelectQuote to help you find the best value for your life insurance policy.
Are you a single parent (or a married parent) who worries about who will provide for your kids if you’re not there? Do you currently hold a life insurance policy? If not, what’s stopping you? Share your experiences in the comments below.