Single Parents - Neglecting Life Insurance

Robert Barney

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This article claims that 70% of single parents have no life insurance:

Going naked: Why don’t single parents have life insurance? | Prism Money

All in all, a pretty good article:

Going naked: Why don’t single parents have life insurance?​
Apr 22, 2011 08:22 EDT​

Here’s a shocker: Almost 70 percent of single parents with children living at home don’t carry life insurance, according to research from the University of Virginia’s Darden School of Business and Genworth Financial.​

I’m not one to echo insurance companies and agents when they foist expensive and unnecessary products on consumers, but isn’t this the exact population that most needs insurance? And isn’t plain-vanilla term life insurance just about as cheap as it’s ever been?​

“We did expect to see pockets that were uninsured, but I think what came back to us was shocking,” says Greg Bucko of Genworth, which sponsored the study. He and Gregory Fairchild, the associate professor who did the survey, surmise that people aren’t buying life insurance because they think life insurance is too expensive, or they fear it is too complicated to buy. “Many single parents are simply too busy — or even too scared — to properly evaluate their life insurance needs,” says Fairchild.​

The survey found that 79 percent of unmarried men who don’t own homes, earn less than $250,000 and have children in the household are not insured. Single mothers are less likely to be uninsured than men, but still more likely to have no insurance than to be covered. The researchers said that these low levels of uninsurance carried through most income levels. The more children there were in the household, the less likely the parent was to carry life insurance.​

Perhaps single parents are holding off on the insurance buy because they aren’t supporting their children; maybe there’s child support coming from another parent who doesn’t live with them. Or maybe they expect that Social Security survivor benefits will tide their kids over. Neither of those are proper solutions. Even a parent who earns no money would leave a financial hole were she to die without planning for where her kids would sleep at night and who would put dinner on the table for them. And those Social Security survivor benefits for kids, equal to 75 percent of the parent’s benefit, probably would not fill all of those gaps.​

Maybe I’m prejudiced, but I’m personally close to two different young adults who were young children when their custodial divorced mothers died. In both cases, the mothers left coverage that enabled their children to continue solid middle class lives, staying in comfortable homes and going on to college and careers.​

Here’s how to make sure you take care of your kids if the unthinkable should happen to you.​

Get info.​

If you’re depending upon a noncustodial parent to provide support for the kids, make sure that person is carrying adequate insurance, too. Find out the details of the policy, says Bucko. How much coverage is there? Where is it held?​
Are your children the beneficiaries?​

Figure out how much you need for yourself.​

A very rough rule of thumb continues to be 6 to 10 percent of your salary. But you could add more to cover college for your kids, the cost of your funeral and even the payoff of your mortgage. It is cheaper to roll those costs into one life insurance policy than it is to buy separate and specialized policies for each one.​

Buy a term policy.​

That is the simplest and cheapest way to get coverage; you buy a benefit for an annual premium that is guaranteed for a certain term (30 years is a good number now, with kids coming back after college and still needing support). There’s no cash built up in the policy, but costs are quite low.​

Comparison shop for the best rates at sites like Intelliquote.com, WholesaleInsurance.net, and Term4Sale. Get quotes from companies that sell direct to customers and may not be listed on those sites. A few to check are Geico, USAA and Progressive.​

Don’t wait for prices to fall; they probably won’t.​

In 1997, a 40-year-old man seeking $500,000 in coverage for 20 years could buy a policy for about $560 a year, according to Term4Sale. By 2008, the same policy’s annual premium had fallen to about $360, and it’s been holding close to that level ever since. Their next move could be up, not down, suggests Robert Barney, president of Compulife, the firm which runs Term4Sale.

Quit smoking, or hurry up and buy.​

Prices for term insurance have risen for smokers, even while they’ve declined and remained flat for nonsmokers, says Barney. That same policy would cost a smoker about $1,400 a year, he said.

Pass it around.​

Keep information about your policy with the rest of your estate documents, and let the people who will be in charge of your estate and your kids know how to find it. If you want to do a little bit of bragging about your new policy, go ahead. Covering your kids’ futures with a good policy on your life is just one more way to be a good parent. As a matter of fact, you could treat yourselves to pizza for dinner on premium-sending nights. You deserve it.​
Yes, I highlighted the paragraphs where I was quoted.
 
One thread on this wasn't enough?
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Single Parents and Life Insurance

Sorry, missed the thread.

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By the way, I submitted this comment to the site/article:

If the single parent really can't afford term life insurance I would strongly recommend that they sit down and discuss that with the person(s) that they have named as guardians of the children in the event of death. I would suspect that those folks might be interested in taking out the policy on the single parent, to ensure that there are funds in place to assist in raising the child should they inherit that responsibility. Term life insurance is just too cheap not to have it in place, regardless of who is paying the bill.

Further, in cases where the single parent is purchasing the insurance, I would set up a will using a lawyer to have the insurance funds (and other assets) placed into a trust for the child and the guardians with explicit instructions on how/when the funds can be paid out.

In our wills my wife and I actually created two trusts for this purpose. One trust was to provide an income to the guardians while they were raising the child, to take care of day to day needs, and the other trust was for the children with specific instructions on how/when the children could benefit from the money until they turned 25.
 
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You really think the average single parent, or married parent has actually bothered to name a guardian for their children?
 
You really think the average single parent, or married parent has actually bothered to name a guardian for their children?

No, but they could certainly tell you who got voted off American Idol and what their "friends" are doing on FaceBook.
 
The point of a market economy is not to give you what you need, but to give you what you want. The goods news, most of the time you will want what you need. This won't be the case 100% of the time.
 
Most single parents especially women are struggle to keep food on the table.
 
Most single parents especially women are struggle to keep food on the table.

For the most part, I would agree with that. However, I also believe most people can find 15-20 a month in their budget if they want to. We make plenty of choices in a month that just throws money away. Starbucks and cigarettes being two biggies. Lottery tickets is another common one.

I'm not saying that adults can't choose how to spend their money, but don't cry me a sob story either as you chain smoke a $5 pack of Marlboros.
 
For the most part, I would agree with that. However, I also believe most people can find 15-20 a month in their budget if they want to. We make plenty of choices in a month that just throws money away. Starbucks and cigarettes being two biggies. Lottery tickets is another common one.

I'm not saying that adults can't choose how to spend their money, but don't cry me a sob story either as you chain smoke a $5 pack of Marlboros.

I didn't say that the majority make wise decisions. People do some real stupid stuff with their money.
 
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