Life Insurance Tips for Single Parents
By: Donna Pleis
Choosing the right life insurance can be difficult enough when there are two parents making the decisions. Making those important choices as a single parent can be even more of a struggle. If you are raising children alone, the life insurance coverage you carry may need to provide support until those kids are ready to support themselves.
How Much Life Insurance Do You Need?
While the standard rule of thumb is to carry between 6 and 10 times your annual salary in life insurance coverage, that may not be enough to protect a single parent with children to support. Recent studies have found that the cost of raising a child to adulthood is as high as $250,000 – and that does not include the high cost of a college education. It is important to look at all of these factors when determining how much life insurance coverage will be enough. Keep in mind that it is better to have too much life insurance protection than not enough.
Choose Your Beneficiaries Wisely
You may be tempted to name your children as the beneficiaries of your life insurance policy. After all, the money is for their benefit. Even so, naming minor children as beneficiaries on a life insurance policy is often a bad idea.
That is because many states do not allow minor children to take control of the money paid on a life insurance policy. It is generally more appropriate to name the person who will be caring for your children as the beneficiary of the policy..
If you do not have such a person in your life, you may want to contact an estate planning attorney for advice and guidance. There are ways to set up the policy so you can protect your children and make sure they have the money they need to see them through adulthood.
Concerns for Divorced Parents
If you are divorced, you need to include your former spouse in your life insurance planning and financial preparations. Your ex-spouse may already have life insurance coverage to protect the children. If so, you may be able to reduce the amount of coverage you have on your own.
Some divorce settlements even require spouses to carry a certain amount of life insurance. If that is the case, you will want to find out how much life insurance coverage the court dictated in the divorce settlement – and make sure your ex-spouse has complied with the order.
If you had your own life insurance before the divorce, you will want to review that coverage and determine whether or not a change in beneficiary is in order. If you expect your spouse to take care of the children in the event of your untimely death, keeping him or her as the beneficiary may make sense. If not, you may need to look at changing the beneficiary to protect your children.
Being a single parent is difficult, and the financial considerations can make it even more so. Life insurance coverage is one of those financial considerations, and it is important to make sure your children are properly protected.