Why Life Insurance Is Essential for Single Parents

iQuanti: Single parents are tasked with so many responsibilities on a daily basis. In addition to physically caring for and nurturing children, they may also be the sole source of financial support for their dependents — and that means putting the right life insurance policy in place is even more essential for single parents. 

If you're a single parent looking to protect your children financially, here's what you need to know. 

Why Do You Need Life Insurance? 

The primary purpose of life insurance is to provide financial protection for loved ones in the event of your untimely passing. And if you're the sole provider for your family, insuring your income is even more important for single parents. Taking out the right life insurance policy means you'll have peace of mind that kids will be financially cared for and be able to meet basic needs, like food and shelter, until they're old enough to provide for themselves. 

Life Insurance Plan Options for Single Parents 

The process of shopping for life insurance can be confusing. And that's because there are many types of plans available. But ultimately, they break down into two main categories: term life insurance and permanent life insurance. 

Term Life Insurance 

A term life insurance policy is generally the most affordable and straightforward option for single parents. And that's because these policies will pay a death benefit if you pass away during the specified term of the policy, often between 10 and 30 years. Before that term expires, you may opt to drop coverage, renew the policy if allowed, or convert it to a whole life policy depending on what your life insurance company allows. 

Many single parents opt for a term life policy because they can lock in an inexpensive rate while they're young and healthy. Then, once the term expires, children are generally old enough to provide for themselves and no longer need a life insurance policy's financial cushion. 

A term life policy is available in several different kinds, including: 

• Level Term: This policy keeps the same premium payments and a level death benefit throughout the entire term. 
• Decreasing Term: A decreasing term life insurance policy has a decreasing death benefit and may be tied to an asset like a mortgage or business loan. The payouts will decrease in value as the corresponding assets are repaid. 
• Guaranteed Renewal Term: Parents who think they'll want to continue coverage in subsequent years can choose a policy that's guaranteed to renew. 

Permanent Life Insurance 

A permanent life insurance policy is a different option with a higher price tag and a guaranteed death benefit for life as long as the plan remains active. These policies also accrue cash value, and some may earn dividends as well. 

The two main types of permanent life insurance are: 

• Whole Life: A whole life policy is consistent in premiums and guaranteed in cash value accumulation. You can use dividends from the cash value to reinvest, buy additional coverage, or reduce monthly premiums, while term life insurance only offers the option to reduce premiums. 
• Universal Life: Also known as adjustable life insurance, universal life allows you to increase the death benefit and pay higher premiums when you want to build cash value more aggressively. 

The Bottom Line 

Life insurance provides financial peace of mind that children will be supported in the event of your untimely passing. And it's even more critical for single parents to consider taking out a term or permanent life insurance policy. Getting the right policy in place means you'll rest easy knowing the kids will be cared for if you're no longer physically around.