Types of life insurance available for single mothers

Making financial provisions for children is important for single mothers. (Pixabay pic)

Anyone who has young children is concerned about their future if something were to happen to them.

Here is a guide for single mothers on the various options of life insurance that would be the most useful.

There are two main types of life insurance and variations on each one.

Term life insurance can provide coverage for the years it is most necessary, such as when the children are young and growing up.

A term life insurance policy can be bought for a specific term, such as 10, 20 or 30 years. If the mother dies during this period the policy will pay the death benefit.

Term life insurance is fairly inexpensive and easy to get. It is sufficient for the insurance needs of most families.

Those interested in obtaining one or more term life policies should get them sooner rather than later as the premiums go up the older one gets.

Whole life insurance or permanent life insurance provides coverage for an individual’s entire life.

Unlike term life insurance, these policies have a cash value that grows, tax deferred, as the premiums are paid. The policyholder can borrow against the cash value or cash the policy out at any time.

Whole life insurance is more expensive and more difficult to procure. Contact a financial advisor if one is considering whole life insurance for the family or as an investment vehicle.

Life insurance on oneself

Whether an individual is the primary caregiver or the primary breadwinner, they need to take out life insurance on themselves. Why?

Insuring the primary caregiver

If a person is the primary caregiver and they have minor children, someone else will have to take care of them if the primary caregiver dies. Who that someone is should be determined well in advance, with that knowledge.

Keep in mind that minor children cannot be named as beneficiaries of a life insurance policy. Name an adult guardian who will have use of the funds to raise the children. The unspent remainder goes to the children directly when they are 18.

Or, an attorney can create a trust for the children and that trust can be named as the beneficiary of the policy. The money will be controlled by a trustee for however long the parent wants – until the children turn 18 or beyond.

How much insurance should be taken out? It depends on how many children there are, how old they are, how much money is required to fund the family’s lifestyle, how many years to be covered and if one wants to provide for extras such as college expenses.

For example, if there are three young children, aged four, eight and nine, it is advisable to take out two separate term life insurance policies, one with a longer term but a lower death benefit to fund the four-year-old’s lifestyle, and one with a larger death benefit but a shorter term to fund all three children until the older ones are 18 and 19.

Insuring the primary breadwinner

The primary breadwinner can use life insurance to replace their income should something happen to them. Again, get two separate policies running concurrently and adjust the death benefit accordingly.

Life insurance on the other parent

If the mother is receiving spousal support or child support, chances are the family law judge ordered the ex to maintain life insurance at an amount that would compensate the family should something happen to him and the support payments stop. If a judge has not ordered that, ask for it via a motion to the court.

The lives of grandparents or other family members helping to raise the children can also be insured to pay others for these services if they die. (Rawpixel pic)

Life insurance on grandparents or other caregivers

If grandparents or other family members are helping to raise the children, it might be worth insuring them for an amount that will replace the cost of their services should they die.

Childcare, house cleaning, preparing meals and transporting the children: all of these can be quantified and a dollar amount attached.

Such term life insurance should end when the children no longer need the services provided.

A term life policy can also provide for end-of-life expenses so the family doesn’t have to worry about finding the money.

Obviously, there will always be that worry at the back of one’s mind, “What if something happens?”

This article is the start of educating oneself about the options to at least make sure the children are financially secure. And getting the life insurance the family needs will provide some peace of mind.

This article first appeared in The New Savvy

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