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How Much Life Insurance Do Single Parents Need?

Life insurance is a must-have for many people, but it’s especially important to have if you’re raising children on your own. Surprisingly, nearly 70% of single parents lack life insurance, according to a study from Genworth Financial. Maybe you don’t have coverage or you’re wondering if your existing policy is enough. These four questions can help you figure out how much life insurance you need as a single parent.

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1. How Much Do You Make?

Life insurance provides your family with an additional source of income in case something happens to you. The general rule of thumb maintains that policies should cover at least 50% of your annual income. However, as a single parent,you may need even more coverage.

2. What Will the Money Be Used for?

How Much Life Insurance Do Single Parents Need?

Simply having life insurance as a single parent isn’t enough. You also need to know what the money will go towards when you pass away. The answer to that ultimately depends on how old your kids are and what would happen to them if you died before they reached adulthood.

Let’s say you have young children, for example. Your insurance policy may only need to supplement income rather than replace. This is in the event that a financially secure relative could take over caring for your children. On the other hand, your chosen guardian might not make enough to cover the additional expense of raising children. In that case, you might need more coverage.

If your children are older, you might want to use life insurance as a safety net. For example, the payout can help pay their college costs in case you’re not around to help out. Average annual costs for tuition and fees can range from a few thousand dollars to upwards of $50,000 at some private colleges. Your policy might need to factor in your child’s college plans. Will your child attend community college or shoot for the Ivy League? Even if college seems far off, you may want to err on the side of more coverage.

3. How Much Debt Do You Have?

When you die, the executor of your estate will assess all of your debts. If you have any outstanding debts, your assets will go towards paying them off first. If you’re still paying off private student loans or have other debts, your creditors could go after your life insurance proceeds. This would happen even before your beneficiaries see a dime, depending on your state’s laws.

If you have thousands of dollars in debt, you might need to increase your life insurance to cover your debts so your kids don’t end up shortchanged. This is also important if you’re raising kids on your own but you’re not legally divorced yet. If that’s the case, your spouse could get stuck footing the bills for your debts.

4. How Much Coverage Can You Afford?

How Much Life Insurance Do Single Parents Need?

Life insurance premiums increase as you buy more coverage. Part of your buying decision will work with what fits into your budget. Term life is the cheapest option and it may be possible to get covered for just $20. Generally, the younger you are when you purchase life insurance, the better the deals are on premiums.

A whole life policy allows you to build cash value that you can borrow against and it’s permanent as long as you keep up with the premiums. Term life policies, on the other hand, expire after a set period of time. The trade-off with whole life insurance, however, is that the premiums are usually much higher. So it’s a good idea to factor in the recurring cost versus the long-term value to determine which policy is the best fit for you. The important thing is to get sufficient coverage for you and your family, coverage that you can afford to pay for each month.

Next Steps

  • For a more personalized answer to the question of how much life insurance you need, check out SmartAsset’s life insurance calculator. The tool helps you find a personalized policy based on your location, birth year, annual income, marital status and other factors.
  • If you have remaining questions, turn to a financial advisor. Life insurance is a key component of a financial plan and a financial advisor can help you determine how it factors into your full financial situation. A matching tool like SmartAsset’s can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to up to three registered investment advisors who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

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Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She's worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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