I’m a single parent. How much life insurance should I have?
UPDATED: Nov 13, 2012
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Asked November 13, 2012
There is no set rule of thumb for how much life insurance a single parent needs. The amount will vary based on different factors, including the age of the children, their health, and other factors such as where the children will live until they are grown. The single parent will need to look at the estimated costs of raising their children to maturity, and then purchase a life insurance policy to accommodate that value in addition to their final expenses.
The idea of a life insurance policy is to prevent your death from becoming a hardship for those you love. For a single parent, this means setting up a policy to pay for the needs of the children until they are old enough to set out on their own. Calculate the cost of living arrangements, clothing, food, household utilities and other child-rearing costs. This will probably be the largest portion of the policy, but it is not the only consideration.
Calculate your final expenses. Whether you are being buried or cremated, including the cost of meeting your final wishes in your life insurance policy will take the burden off your survivors. A funeral director or financial planner can help you make all the necessary arrangements. If you want to set aside an inheritance for your children, that needs to be added to the policy value.
If you want your children to go to college, be sure to set up your life insurance policy to include tuition fees. This is done by calculating the current tuition rates and then multiplying the total by an estimated inflation amount, generally around 10%. This lets you set up college tuition so that it will be sufficient rather than fall short because it was based on the current tuition schedules.
Add the different values together to arrive at the amount of life insurance you should realistically have. If your children have special needs or disabilities, be sure to factor the costs associated with those needs into the policy in addition to the factors listed above.
Answered November 13, 2012 by Anonymous