Life insurance is one of those creepy and morbid topics that is unfortunately really important to talk about. Think about it though. Single parents need to understand life insurance even more than dual parents.
With almost 34% of American children living with single parents, this guide is super needed.
Single Parent Life Insurance Guide
To keep your family above water and to support your children’s future educational expenses, a single parent’s life insurance is a must-have item. For a two-parent household, if one of them dies, the other would still be able to keep family running. Being a single parent, you don’t really want your kids to suffer just because you don’t have life insurance.
Read through this guide and get your questions answered.
When You Should Buy Life Insurance
There is no fixed time that you have to buy life insurance. Besides, life insurance is important when you have dependents. You can buy either term life insurance or whole life insurance. Whole life insurance is more beneficial if you want to plan well for your kids.
If you get life insurance earlier, then you can target some big coverages with small premiums. In fact, you can buy it before marriage as well. Also, life insurance is important to cover a single parent’s final expenses. To know more about final expenses and life insurance plans, click here.
Name the Correct Beneficiary
Being a single parent, you should update whatever insurance policy you have and make your children the legal beneficiaries of that insurance. Sometimes, people forget to update their policy and their ex-spouse retains the beneficiary.
If you are separated instead of divorced, which is more commonly known as community property states, your spouse will automatically get the beneficiary of the policy. So, make sure you check your policy and change the names to the correct beneficiary.
In the USA, children are minor to get death benefits from the insurance company. Rather the company would provide it to any legal guardian you mention in your policy. What would you do if you didn’t have such an option?
In such a case, you can mention any trust to get that legal authority. The custodian of your children will get the death benefits, and they will pay all legal payments on behalf of your children. That covers educational expenses, mortgage payments, your final expenses, business debts, and much more.
When your child becomes eligible to receive the funds, they will hand over the rest of the money you left for them.
You can also nominate a portion of the death benefit to a person whom your child has a close relationship with. If you believe that he or she can be a good support to your child, then you could pick that person as a legal guardian instead of a trustee.
Checklist for Single Parents
Even with your untimely absence, you want the best lives for your children. As such, you can make a checklist to get the proper ideas of expenditure and make a plan to support every need your children have. Also, this checklist would give you an estimated coverage for the insurance policy, so this is something that should be taken seriously.
- Collect your children’s school emergency card reports.
- Keep your children’s medical reports as well as doctor’s mobile number and information in a safe space.
- Estimate your children’s financial need from their current situation to their adulthood.
- List your total monthly bills, lease payments, business debts, etc.
- Choose an individual who can take care of your children in your absence. Most importantly, choose someone reliable enough to execute your will properly.
- You can create a specific power of attorney so that your children can retain all your property and no third parties can confuse or trick them.
Make a Budget to Afford Premiums
Before purchasing life insurance, it is better to calculate the coverage required. Making a budget will help you understand whether you can afford premiums for this coverage or not.
Making budgets also allows you to calculate how much you can put away for savings. Being a single parent, if you put money on tax-advantaged 529 accounts, you will get accrued compound interest for your savings. Just like with retirement accounts, your returns reinvest themselves.
Budgets are also good to cut off any unnecessary costs you may have and maximize your earning potential. You may not realize that every month you spend more than a thousand dollars on candles, which can of course be minimized to earn more goods. Saving unwanted costs can help you to go for a bigger financial plan.
How do you keep track of your budgets? It is simple; track your expenses on spreadsheets such as Microsoft Excel or Google sheets. Make some categories and points in the areas of improvement. If you know how to run equations through the sheet, then tracking your spending will make it easier to check your budget.
How to Claim the Death Benefits if You Lose Your Parent
Though it is a touchy topic to discuss, children need to know how to claim benefits once they lose their parent.
As a single parent, you need to have an open discussion about your life insurance policy, including how to contact the company, how to claim your death certificate, and the benefit amount resulting in your death. Other than that, you can keep your lawyer’s number and relatives’ numbers in a file for them to access.
In case you are the child and you are about to receive the death benefits, look for the documents. Make sure you check every corner of the closet and click on every folder on your parent’s desktop or laptop. If it does not work, then try Life Insurance Policy Locator Service.
Other than that, you can look for your parent’s bank statement to find where he or she was paying premiums. However, if you are minor, then you won’t be able to access bank statements and there is a high chance that a life insurance carrier will not speak to you without your legal guardian.
In such a case, your parents must have named a legal guardian or trust to oversee the fund. Contact your guardian or trust to alert the insurance carrier for death benefits.
If there is no custodian, then the money will be used to pay any debt the parent has first and then the rest will be disbursed to you. This probate can take a long time. Sometimes, it can take over a year or so. However, if your deceased parent has any type of will, then you may get out of such hassles with ease.
Being a single parent is an added responsibility to your child. If you take your life insurance lightly, then your children may dive deep in troubles in any sudden accidents. So, be responsible and plan the best for your children.