In a two-parent household, when one of the parents dies, the surviving parent provides income, looks after, and takes care of the children’s expenses. However, single parents do not have this advantage. Who will care for your children’s expenses should something happen to you?
Life insurance for single parents is a must-have for anyone who wants to provide another source of financial support for their children if they pass away.
A life insurance policy is important for single parents because they need to financially protect their children when they are gone. Life insurance creates a safety net for their child’s everyday living expenses, care, and continuing education.
So, as a single parent, you need to know how to financially secure your children if something happens to you. This blog post discusses why you need life insurance for single parents, the best types of life insurance available, and how to designate a beneficiary for your policy.
Continue reading to find out more.
Why Do You Need Life Insurance for Single Parents
As a single parent, you are your family’s sole breadwinner and provider. Your children depend on your income to meet their present and future needs.
You need to financially plan for your children’s present and future well-being to ensure they are protected. Getting life insurance coverage is a good idea. Even if you share responsibility with the child’s other parent, getting your individual life insurance policy is good.
Think about how your children will meet their present and future needs should something happen to you unexpectedly. There may even be several debts that you would leave behind, like a mortgage or your final expenses.
Life insurance is a lifeline your family may need if you pass away. It is meant to replace your income and neutralize your debts till your children attain the age of majority.
With a life insurance policy in place, you can ensure that anyone who takes guardianship of your kids has enough funds to take care of their expenses while maintaining their lifestyle.
With life insurance, you can also ensure that your children’s future expenses are covered. For example, you can help cover your children’s post-secondary education, pay for their first home or car, and ensure their future remains bright.
Types of Life Insurance for Single Parents
Adding another bill to the long list of expenses on your monthly budget can be challenging. However, there are many reasonably priced life insurance policies that can offer the protection you need.
Speak to an insurance expert, shop around the best insurance companies in Canada and know the options available to you based on your age, health status, and the length of your term.
As a single parent, you can buy an affordable life insurance policy with smaller coverage and increase your coverage over time. You can make plans and set short- and long-term financial goals.
A permanent life insurance policy can provide you coverage for as long as you live. The policy builds up a cash value that can save up money. The money can be accessed, borrowed, or withdrawn during your lifetime for whatever you want.
However, term life insurance provides you coverage for a specified term outlined in your policy. The term could be 10, 20, or 25 years. This is the perfect option for you if you are young and healthy.
It is temporary, more affordable, and can cover you till your kids turn adults and are no longer financially dependent on you. When the term ends, you can renew your life insurance policy to extend your coverage for another term.
Further, no medical life insurance lets you apply for coverage without undergoing any medical exams. You will only answer a few health-related questions. This will be a great option if you have a pre-existing health condition.
Also, a traditional life insurance policy requires a complete medical examination. This type of policy requires full underwriting. It might take one to three months before the policy is issued.
How Much Life Insurance Do You Need?
It is pretty challenging to determine the exact amount you would need to fully cover your children’s present and future needs if you pass away. However, there are three main factors to consider when determining how much life insurance you need as a single parent.
- Income: Financial experts in Canada recommend that you should have a death benefit that is equal to at least six to ten times your annual income. This should be enough to cover everyday expenses like bills and groceries for a couple of years.
- Outstanding debts: Your life insurance policy should be enough to cover all your debts. Don’t leave your children and loved ones with the burden of paying your debts. You can ensure you get as much coverage as possible to cover your mortgage and co-signed loans.
- Future expenses: You should ensure that your life insurance death benefit is significant enough to cover your children’s future costs. If they want to go to a private school or college, there should be enough money to pay for everything.
These three factors put together can help you make sense of how much coverage you need to buy. You can also include your end-of-life expenses. You should know that you would need more coverage than someone relying on a surviving co-parent to care for their children.
Who Should You Name As The Beneficiary Of Your Life Insurance Policy
Many single parents in Canada would want to name their children as the beneficiary of their life insurance policy. However, you should avoid naming your minor as your beneficiary because a minor cannot legally accept life insurance payout in Canada. The death benefit would get stalled in a lengthy legal proceeding.
So, instead of naming your minor child as your beneficiary, you can set up a trust and name the trust as your beneficiary. You can specify your wishes on how the money should be distributed and spent and what it should be spent on. Your trustee will ensure your wishes are carried out.
You can designate a guardian to look after your children if you should pass away. The guardian will be entrusted with the responsibility to provide for your minor children under court supervision.
You can speak to a financial advisor to help you make a comprehensive plan for your children’s future.
How Do You Protect The Death Benefit For Your Children
As a single parent, you should have someone you can trust with your child’s care when you die. You should share your end-of-life plans with this person or other loved ones.
Tell them where to find your life insurance policy documents and the contact information of your lawyers and financial advisors.
Enlighten them on how to file a life insurance claim and all they would need to start the process. This would save them the hassle of probate fees, lengthy court proceedings, and settlement costs.
Final Thoughts on Life Insurance For Single Parents
Buying a life insurance policy as a single parent is one of the best financial moves to protect your children’s financial future.
You wouldn’t want to leave your children uncared for when you die. So it’s best to have a policy in place that can take care of your children’s present and future expenses.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
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