Going naked: Why don’t single parents have life insurance?
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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.
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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 times 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.
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Try these:
1. single parent can’t afford life insurance premiums
2. insurance companies attempt to sell products that give the company maximum profits without informing customers about what life insurance is for and why the best deal may be guaranteed renewal, level term insurance. Put the difference in premium cost into a good ROTH IRA.
3. maybe the single parent is one of those whose future is already insured under a generational welfare recipient program.
My family has been on many and various government programs for generations. As I remember, none of my relatives bought life insurance. Why should they—they have a guaranteed entitlement retirement for themselves and their children.
If you have to ask this question, then you’ve probably never been a single mom.
gee, they made one of the biggest mistakes they can by being a single parent and you expect them to follow it up with good choices?
Actual Taxpayer: made a mistake by being a single parent?? Crawl back into your cave, caveman! You probaby wrote this terrible article!
I’ll tell you why they aren’t buying term life insurance. It’s like betting against yourself. You are paying needed cash to someone for a benefit that you only receive if you die early. Most people do not think they will die early so they don’t see any value in the bet.
@Anarcut, apparently you don’t understand or see the true value in owning life insurance. Owning life insurance is not a “bet”. In a bet, you could either win or lose but in case you missed it, we will all die one day. All you are doing by owning life insurance, is trading pennies for dollars to protect the people you care most about in the event that you die “prematurely”. No one ever expects to die, or even die young for that matter, yet each day we read in the newspapers that someone was killed or died too early and we have all attended funerals where we have muttered in low tones “Did he/she have any life insurance?”.
I personally have policies on myself, my wife and my daughter and would not let them lapse regardless of my financial situation. I will pay for them, because I know that if I should die before I’m an old man, I want to make sure that my family (the ones I love) will be able to stay in our home, pay all the bills, send my daughter to college and not disrupt the lifestyle that i have worked so hard to give them. It’s about love and being selfless. I will never see the “benefit” of my life insurance policy because I will be dead, BUT, my family will surely see the benefit of it and that is why I believe in life insurance.
And finally, remember this….Life insurance isn’t for those who die-it’s for those who live.
LifeHappens hit it spot on. Term Life Insurance is not complicated or hard to understand. It’s also very inexpensive.
Sadly, I’m attending a funeral tomorrow for a friend of mine whose 23 yr old son died in an auto accident over the weekend. I have another friend who recently passed away of an unexpected heart attack at age 41. One never knows when the good Lord will take us.
It’s selfish and irresponsible in my opinion not to purchase Life Insurance. It is a living benefit given to those we love, not a death benefit
$250,000?? Lets try the third of Americans earning less than $35,000 a year and can’t make ends meet even now. I would hazard a guess that 99% of them don’t have life insurance; of any kind or value.
Term life insurance has winners and losers. They are those who collect and those who never collect. Yes, it is a high risk bet with the odds stacked in favor of the insurance company. The argument that everyone dies is specious because most people outlive the 1 year term of a policy where the cost escalates with age until it is too expensive to renew.
The smarter ones are those who manage their financial affairs prudently and stay out of debt. They never waste money buying term life insurance.
I have never purchased term life insurance or health insurance.
I purchased my home for cash after saving/investing for it over a 10 year period before I married.
I self fund medical costs by saving/investing a specific amount each month. This fund is now very large and returns a 5 figure profit each year after paying all medical costs for a family of 4. My survivors will not have to change their lifestyle for monetary reasons.
That said, most people believe in accumulating debt. They rely on fortuitous happenstance to maintain their lifestyle. Those are the only people who may benefit from term insurance. Of course they go deeper in debt to pay for it.
@BBJJ-I will grant you that yes, the odds are in favor of the insurance companies. The liklihood (sp?) of death is far less when younger than it is as we age. However, I have a stack of proof, collected daily from my newpaper here in Atlanta that shows that death is no respector of age. I’m sure those people didn’t think death was about to visit them. Term policies can cover a person not for 1 year, but for 30 years! I suggest mixing term coverage with permanent coverage. as to why people cancel insurance, this could be due to many reasons. Some could be that the people who own these policies don’t truly see the value that it brings, times are tight financially, so they of course want to drop their insurance coverage because it’s easy, out of sight, out of mind. They think they are gonig to make it to a ripe old age or they think that the government will give their family money or their family will be able to get along without them or their income. I would like to add that I am in the insurance industry so I have a different viewpoint than many.
You sound as if you have been raised to understand the value of money, budgeting and are willing to make personal sacrifices to acheive your financial goals and I applaud you for that. However, let me ask you this, would you have to tap into your savings in the event you became disabled and could no longer generate an income? You said you have never purchased health insurance either; would you have to use that savings to cover medical costs if you were diagnosed with cancer? What if you live to be an old man one day and your health deteriorates to a state where you could no longer perform the five daily living activities, without a LTC policy, you would have to use your accumulated savings to pay these costs out of pocket. Did you know that many life insurance policies now have an optional rider you can attach to the policy called Terminal Illness Benefit which would pay 1/2 of the face amount of the policy if you were diagnosed with a terminal illness and were expected to live 12 months or less? That would be pretty handy, yes? In addition, as a general rule, proceeds from a life insurance policy are tax free up to $500,000 so unlike in your situation, my family won’t have to worry about estate tax, death tax, probate costs, etc.
Without a life insurance policy or LTC policy, you MAY have to tap into your savings to pay for unexpected costs which could deplete your savings to a point that your family might have to change their lifestyle.
So, in my opinion, it is wise to save your money, be prudent and diligent, but part of that also includes owning life insurance. When you die, your family will have to pay for your funeral and bills out of YOUR accumulated wealth, where if you had a life insurance policy in place before you die, they would be able to pay for it using money from your policy, have money left over (hopefully) and still have the money you worked so hard to save for them. It makes sense to me.
Insurance is either unaffordable or simply not a priority.
I am bothered by so-called research wherein the conclusions drawn come not from the data collected but from the “surmise” of the researchers about what the data mean. If they really want to know *why* people choose not to purchase life or health insurance, they should *ask* them those questions specifically in a follow-up survey.
What is shocking… is that the writer’s of this article say they were shocked. $250,000.00 is an artificially high cutoff. I would expect that the ‘median’ income of the overwhelming majority of single parent families in this country is closer to about one-tenth of that. And in such stressed socio-economic groups, there exist an exorbitant number of smokers. Even when employed full time, many of these families need the support of food banks and rent/utilities assistance. Would the writers also be surprised that substantially more than 79% of them don’t have chauffeurs, maids, or minks?
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 the 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 children, 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, at which point they were paid the balance.