How Much Life Insurance Does a Single Parent Need?

A 2011 study found that approximately 70% of single parents are living without life insurance coverage (University of Virginia's Darden School of Business). This is in spite of the fact that single parents are possibly the one group that's most in need of this type of insurance coverage due to the vulnerability of their children's welfare in the event of an untimely parental passing. Whether you currently have no life insurance coverage or you're wondering if the coverage you have is adequate for your requirements, we have some information that can help determine just how much life insurance you likely need.

How Much Income Must Be Replaced?

As a single parent, if you were to be taken away from your family through a premature passing, the amount of income you're currently producing may need to be replaced in order to allow your kids to continue their lives in some semblance of financial normalcy. The current age of your children should be considered as well as the financial condition of your chosen guardian.

If the kids will be going to a family member who is relatively financially secure, the amount of life insurance you now carry won't need to be as much as if they'll be going with a guardian for care without enough current income to deal with the additional expense associated with taking care of your children. A commonly accepted rule of thumb says the face amount of your insurance policy should be equal to at least half the amount of your current annual salary for the total number of years until your children reach adulthood and are able to financially fend for themselves.

If you see college in their futures, this amount would need to be increased. You'll also have to factor in an amount equal to your funeral and burial costs and all of your outstanding debts, since creditors will likely go after your estate to recoup this money, and this will happen before any death benefit payouts go to your beneficiaries.

How Much and What Type of Insurance  

                                       

For a single parent, a balance must be made between the need for X amount of life insurance coverage versus the ability to pay the premium on this amount of protection. The best option is to buy term insurance, which is more affordable than whole life, and to take on a premium payment you know you can handle.