Life as a single parent isn't always easy, and one of the issues that can continually crop up over the course of the year is financial burden. Caring for children is expensive and often difficult to afford even on two incomes, so single parents may need to be even more cognizant of the issues their families will face as time goes on.
There are many financial issues single-parent households will be wise to keep in mind, including the need for budgeting on an ongoing basis and putting as much money as possible away for a rainy day, according to MarketWatch. But at the same time, experts largely concur that such planning for the future - especially when it comes to unexpected life events, such as job loss or medical emergencies - should probably also include at least some sort of life insurance coverage to ensure kids will be financially sheltered in the event of an untimely death.
A pressing need
Life insurance may not always be a financial tool that consumers of all stripes - let alone single parents - feel like they can reasonably afford, but this often springs from misconceptions about what such coverage actually costs, according to Cannon Financial Institute. In some ways, it can be argued that a term life insurance policy for a few hundred thousand dollars - which isn't likely to cost a particularly large amount each month - will be plenty to insulate even young children from financial hardship if the single earner in their household were to pass away.
The most recent government data shows that the cost of raising a child to the age of 17 is about $233,000, not including expenses for education like private high school or college, the report said. Most people aren't going to have that kind of money put away, and this is where life insurance can provide significant financial help without breaking the bank each month.
But because there are so many misconceptions about life insurance (including the tendency for consumers to conflate the higher cost of permanent coverage as term policies that carry much lower premiums), it may be imperative for those within the industry to be more proactive about educating people - and especially single parents - about why the need is so critical, the report said.
"The single most urgent issue which should concern every advisor, and push you to ask questions of your clients, is this: approximately seventy percent of single parents don't have any life insurance," said Linda Eaton a subject matter expert and executive vice president at Cannon Financial Institute. "This is a staggering figure, and you are in a position to do something about it. Clients put off buying life insurance as if such actions will advance their date of death. It's human nature. But you will certainly get their attention if you walk them through the consequences to their children of not having life insurance. With single parents, it is absolutely critical that you inquire about life insurance."
What to expect
Because of that clear need for some education on this subject among consumers writ large, it's also important for the life insurance industry to do a better job of highlighting what constitutes the "right amount" of coverage, according to Smart Asset. Obviously that kind of calculation begins with how much money the person the policy covers makes each year, and while industry suggestions do vary, the general rule of thumb is that any death benefit should replace about 10 years of current salary. However, that number might be even higher for single parents.
These calculations will likely also have to include how parents will help the loved ones they leave behind pay down their outstanding debts, such as credit card balances, student loans, auto loans and the like, the report said. The more debt a person has, the more likely they will be to need coverage above and beyond that basic guideline.
Any decisions about how much life insurance to buy will need to be made carefully, with all due consideration paid to a number of financial factors, the report said. Each person's financial situation is unique, but most insurers should have options available that will help them get all the coverage they'll need to protect their families going forward.
With these issues in mind, it's wise for single parents to start looking into their options for life insurance coverage as soon as possible, according to Wealthy Single Mom. The vast majority of single-parent households go without and could therefore find themselves in a difficult spot should anything go wrong in the future. Generally speaking, younger, healthier people are going to be able to obtain far more affordable coverage, so the sooner parents get locked into a policy, the better off they will be when it comes to affording the costs in the long term.
It's vital for consumers and insurers to come together as a means of finding the kind of coverage that will work going forward, but it may be imperative for insurers to make that important first connection. Even single parents, who have significant need of life insurance, may have some reticence about getting involved, particularly if they already understand the value life insurance can provide for them on an ongoing basis.