Insurance for Single Moms: Why You Need It and How it Works

I have a young son, and I was raised by a single mom. So before we dive in, I want to welcome you here. Insurance for single moms is a critical topic. Maybe #3 on my list of money priorities. Fortunately, there are options out there that can help make sure your family is taken care of. This blog post will discuss why insurance is so important for single moms and how different types of coverage work. High five. Let’s do this!

Health Insurance for Single Moms

Insurance is all about risk management. The goal of insurance isn’t to provide a new Beemer every year or pay cash for fancy vacations (although that sounds awesome). It’s to cover your butt when something unexpected happens. When it comes to health insurance, this means insuring against major medical expenses. Minimum.

Employer-Provided Health Insurance

For most single moms, the best option for health insurance is employer-provided coverage. If your company offers health benefits, their plan usually has lower premiums and wider coverage than you could get privately. Alternatively, you could look at options through a union or professional organization, which can also get preferred group rates.

The Health Insurance Marketplace

If you can’t get health insurance through your job, the options are terrible or you’re self-employed, look at the health insurance marketplace on Healthcare.gov or connect with an Insurance Broker who can help compare plans and prices for you. Prices for these vary a great deal from state to state.

Just like with employer-provided plans, there are different types of policies to choose from Bronze, Silver, Gold, and Platinum. You can get a policy that covers just you, just your kids, or one that covers your whole family.

1. Bronze Plans – offer the lowest premiums, but have high deductibles and co-pays.
2. Silver Plans – offer a middle ground between Bronze and Gold plans.
3. Gold Plans – usually have the highest premiums, but also offer low deductibles and generous coverage.
4. Platinum Plans – these offer the best benefits, but come with the highest premiums

Short-Term Health Insurance

If you’re in between jobs or waiting for your employer-provided health insurance to start, you can buy a short-term health policy. These policies are not as comprehensive as regular health insurance, but they do provide some coverage for you and your kids and can be a lifesaver if something unexpected happens while you’re making a transition.

COBRA

This allows you to continue your current health coverage with an employer who offers it, at 102% of the total premium (so, premiums you paid, plus premiums the employer paid, plus 2% admin fee). COBRA can be a good idea if you transition mid-year and already have paid toward your deductible and out-of-pocket limits. AKA, you’re pregnant or in the middle of treatment. It can also be expensive, so shop around.

How To Calculate the Total Cost of Health Insurance

Now that you know all about the different types of health insurance policies, it’s time to do some math. You need to calculate how much your monthly premium will be, as well as what your deductible and out-of-pocket maximum are.

The total cost of a policy is made up of these three factors: Monthly Premium, Deductible, and Out-of-Pocket Maximum.

Monthly Premium: this is the amount you pay every month to be covered by a health insurance policy. Insurance companies use your age and place of residence to determine how much they should charge for monthly premiums.

Deductible: This is the amount that must be paid before the insurance company begins to pay for covered expenses. For example, if your deductible is $2000, you will need to pay for all costs up to $2000 yourself before the insurance company starts footing the bill.

CoInsurance and the Out-of-Pocket Maximum: This is the most you will have to pay in a year for medical expenses. How is it different from a deductible? It’s that line on the bill that says “Patient Responsibility.” It’s basically whatever is over their negotiated rate, or your coinsurance rate. Once you pay up to this amount, the insurance company will start paying for all of your covered expenses.

Total Cost = All Your Premiums + How Much Deductible and CoInsurance You Pay

Up To the Out Of Pocket Max.

The most you will pay in a year is your out-of-pocket max, plus your premiums. My kid spent the first five days of 2022 in the ICU burn unit (he’s fine), but aside from a catastrophe, it’s hard to hit your out-of-pocket max. A good rule of thumb is to look at your last two years and see what you actually used. It then becomes much easier to pick a plan.

Should you just insure your kids?

Ugh. I’m so sorry that tradeoff is on your mind! I vote no, and here’s why. As a single mom, you are the bedrock for your household. You fall apart or you don’t get the care you need, your whole family will suffer more. s a mom who has maxed her out-of-pocket limit on her kids’ medical emergencies, I can tell you 100% you never want to be making financial tradeoffs when your kid is in the ICU.

Keeping everyone minimally insured is a financial priority above saving for retirement, saving for college, going on vacation, splurging in any way. Basic coverage is a top priority.

Best Kind Of Health Insurance Plan for Single Mom Families

You have a lot of health insurance choices. You can go with an HMO, PPO or HDHP plan. There are also high deductible plans called HRAs that are used as part of your salary package for small businesses and self-employed individuals. Insurance companies consider them to be supplemental coverage because you could use it in conjunction with other health insurance. The best option for you and your family, as a single mom, is to go with an HMO or PPO plan.

HMO: Health Maintenance Organization (Think Kaiser)

HMO’s offer plans where you have to go to specific doctors and hospitals in their system. If you go out of network, you will be responsible for 100% of your costs. This is a great option if you don’t have to go out of network because the costs are low and very predictable. For instance, if you plan to have a baby or know you need surgery, they tend to limit the out-of-pocket costs.

PPO: Preferred Provider Organization (Think Aetna)

This is a plan where they prefer you go through a specific network of doctors and hospitals, but you have more choices than with an HMO. If you work with a major insurance carrier, you typically have a lot of choices, make sure they are in the PPO network.

HDHP: High Deductible Health Insurance Plan (Also Aetna, Etc.)

HDHP Plans are PPO plans with a higher deductible, lower premiums, and the ability to put money into a tax-free investment account. I like them if you can afford the deductible because you typically don’t hit your out-of-pocket max, and they are an extremely tax-efficient way to invest. However, they are risky! My toddler pulled a cup of boiling tea on himself on Jan 3, and we maxed out our plan pretty much instantly. ($22,000 out of pocket max).

HRA: Health Reimbursement Arrangement

This is a type of supplemental coverage that can be used in conjunction with other health insurance. It’s a good option if you have a high deductible plan because it helps cover some of your costs until you reach your deductible. It’s also a way for small or non-profit employers to sweeten their benefits deal. You typically won’t opt into it, but if you ask your Benefits person about it over lunch, you will be able to finish your meal in silence. They are super proud of this one.

Help For Single Mothers with No Health Insurance

1. Maternal and Child Health Block Grant – This is a grant provided by the federal government to provide health care coverage for children and pregnant women. In order to qualify, you must have an income at or below 200% of the federal poverty line.
2. Medicaid and CHIP (Children’s Health Insurance Program) – If your income is low enough, you may qualify for Medicaid or the Children’s Health Insurance Program (CHIP). These government-sponsored health insurance programs offer free or discounted coverage to people with qualifying incomes. The threshold for qualification is low, however. You can find out if you qualify by visiting Insurance.gov or filling out their pre-screening tool. Your state may have better options.
3. Partnership for Prescription Assistance – The Partnership for Prescription Assistance works with pharmaceutical companies to get free or discounted medicine for people who meet certain income and other eligibility requirements. You need to reach out to them directly.
4. Vaccines for Children Program – The Vaccines for Children Program provides free vaccines to children ages 18 years and younger who are uninsured, Medicaid-eligible, Native American or Alaska Native.
5. Consolidated Health Centers Program – The Consolidated Health Centers (CHC) Program provides free or low-cost health care services to underinsured and uninsured individuals at facilities in medically underserved areas.
6. Your Parent’s Health Insurance – Insurance carriers will let you continue on your parent’s insurance until you’re 26, if they offer it. They will not allow you to put your own children on grandma’s plan, so if you take this option, your kids will need separate insurance. This could be a good bridge solution until you can all get on the same plan.

Disability Insurance for Single Moms

This one really doesn’t get talked about enough, because disability insurance is worth it and critical to your financial security. Particularly if you don’t get much/consistent/any help from the other parent. Why? Women are FAR more likely to become disabled. Pregnancy is the obvious one, but if that ship has sailed: arthritis and rheumatism. Plus the afterburn of having children. My lower back will never be the same, and my thyroid is toast.

Why do single moms need disability insurance?

Disability insurance is specifically designed to replace your income. It’s just there to prevent you from having to raid your savings if you get hit by a bus. That’s why it’s critical if you are the sole or primary breadwinner for your family.

Disability insurance definition

Disability Insurance is an insurance policy that pays an income if you are unable to work due to injury, illness, or pregnancy. Whether that income is taxed or tax-free, and how much of your income it covers and for how long – those can all vary by plan.

Short-Term and Long-Term Disability Insurance

There are two types of disability insurance:

Short-term disability pays you a portion of your income if you are unable to work for a short period of time, usually six to 12 months.

Long-term disability insurance pays you a portion of your income if you are unable to work for an extended period of time, usually two or more years.

They are typically used for different things. Short-term disability applies to conditions like pregnancy or a broken leg that will heal pretty predictably. Long-term disability applies to conditions like cancer, which may take years to resolve.

How does disability insurance work?

Most disability policies have a waiting period before you can start collecting benefits. For short-term policies, the waiting period is generally a week or two. For long-term policies, the waiting period is typically six months to a year. However, some plans do not have a waiting period. After that, you receive a percentage of your income, usually 50 to 70 percent.

What does disability insurance cover?

Disability insurance is limited to conditions that impact your ability to work. That means you cannot collect benefits, it can still do your job with reasonable accommodation.

How do I get disability insurance?

The best way to get disability insurance is through your employer. Insurance plans are not portable, so if you change jobs or leave the workforce it can be difficult to get coverage. Insurance is very expensive on the individual market, and it can be prohibitively expensive for single moms without employer-provided benefits.

This is one of those employer benefits you pay extra to max out if you can.

Is disability insurance worth it?

Absolutely, if your income is your kid’s only support.

Absolutely, if you have any chronic, progressive, or likely-to-be-inherited health issues.

Absolutely, if your savings buffer is slim.

Maybe, if you have huge savings to fall back on.

Short-Term Disability in your State

Your state may offer short-term disability insurance (STDI) or Paid Family Leave. STDI typically covers a portion of your salary for up to six months, while PFL is shorter, usually to allow you to bond with a baby or take care of a sick kid.

Only five states offer STDI: California, Hawaii, New Jersey New York, and Rhode Island.

PFL states are California, Colorado, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Washington.

Social Security Benefits for Moms with Disabilities

Social Security Insurance (SSDI) and Supplemental Income Insurance (SSI) provide benefits for people who become disabled before they are old enough to retire. However, they are hard to qualify for and are intended as long-term income.

You can receive SSDI benefits if you have a medical condition that is expected to last at least 12 months or result in death. You must be able to prove that you cannot do any job, even one you could have performed with reasonable accommodations.

Life Insurance for Single Moms

Important note: I don’t sell insurance. Life insurance is an important part of financial planning. If someone is giving you advice on insurance as retirement or estate strategy, always ask if they sell it. Insurance agents work on commission, and their commission varies from product to product.

What Is Life Insurance, Really?

Life insurance is a contract between four parties:

1. the owner (most likely you)
2. the insured person (also probably you)
3. the beneficiary (the person or people who get the money)
4. the insurance company

There are some complex ways to structure life insurance if you are a small business owner or rich as hell. This post is not for that!

We’re going to assume you are a single mom, considering a life insurance policy for your own life, to benefit your kids and other dependents. For the most part, you want term life insurance. Whole life insurance for single moms like the Kardashian Sisters.

Do Single Moms Need Life Insurance?

The short answer is yes. The only reason you wouldn’t need it: if you have substantial assets that would turn into cash immediately if you died and cover the needs of your dependents for many years. Here’s why:

Your Kids Can Inherit Your Debt

“The only [wo]man who sticks closer to you in adversity than a friend is a creditor.” Sad, but true. Your debts don’t all just disappear when you die, some get passed on to your children until they’re eventually paid off. Here’s a quick synopsis:

• Like everything with the state planning, varies by state.
• A deceased person’s estate will typically settle their outstanding debts. In other words, the assets they held at the time of their death will go toward paying off what they owed when they passed.
• However, if their estate can’t cover it, it’s possible your kids will inherit the debt.
• Anything you cosigned for, or on a shared account, your estate will definitely be on the hook for.
• Debt from Home equity loans is inherited. Another reason why they’re not a great source of funds.
• Medical debt can vary. It’s often waived, but can be inherited, so check your state details and do a little research. Your estate may have to work to get it waived.

“Transitional Costs”

When someone dies, their dependents experience a lot of personal and administrative upheaval. Upheaval also generally comes with a price tag. Here’s an example: Sheila passes away, leaving behind Rose and John, her two kids who are still at home and in elementary school. Their dad is not in the picture. Sheila also helps support her elderly mom, who lives in a retirement community.

• Someone needs to care of the kids immediate. That person might not be local.
• Any bills coming in this month and next month need to have cash available in the next few weeks. This could be rent, mortgages, utilities, or any bills Sheila was paying for her mom.
• If the kids need to move in with a family member, there are moving costs

Every situation will be different, but you get the picture. Stuff comes up. A life insurance policy creates funds that are available immediately to help with the transition.

Funerals Can Be Expensive

Personally, I want to be cremated. On average, in the US, that will cost $1650, before you get to anything fancy. And that can vary WIDELY.

Funerals run between $6,000-20,000 on average. That is a lot of dough.

Final Medical Expenses

If you spend any time in the hospital, hospice, or long-term care (and didn’t or weren’t able to invest in long-term care insurance) before you die, those bills will still need to be paid. As I mentioned above, in some cases you can get them waived, but by default, they will be inherited.

How Does Life Insurance For Single Moms Work?

Term life insurance is pretty simple. You purchase a policy that covers a fixed term, perhaps the number of years between now and when you think your kids will be firmly established. (Read more on how much life insurance single moms need.)

Every year, you pay a premium on that policy, like with your car or homeowners insurance. When you die, the beneficiaries get paid. Straightforward.

Here’s the first catch: minors can’t be beneficiaries, which is another reason it’s so important to name a guardian for your kids. If you name them (which you may not even be allowed to do), their guardian will get the money. A little forward planning on who you want to be in charge if you pass away can help get the money into the right hands quickly. For me, it’s my sister-in-law.

Here’s the second catch: if you die within two years of purchasing the policy, your beneficiaries might only get your premiums. Read the fine print

Finally, if you outlive the term of the policy, that’s it. You don’t get your premiums back. On the flip side, you’re still alive. This is also why term life is cheaper when you’re younger. The insurance company makes money by betting enough people survive (or in actual fact cancel) their policies, so they can afford to payout the ones who die in the term.

How Single Moms Should Think About Term Life Insurance

Term life is relatively inexpensive, which makes sense. It’s considered a temporary policy that only covers specific terms. Once your kids are old enough to support themselves, and you have paid off debt they might inherit, you may not need a life insurance policy anymore.

A good rule of thumb is to look at what costs you will have between now and the end of your working life, less saving for retirement (can’t retire if you’re dead). This could include:

• Costs to care for and maintain your kids, similar to what you pay every month in rent, food, etc.
• Costs for education and other special expenses like a wedding, you were planning to help with
• It’s good to factor in extra costs for childcare, because their guardian might not have as much help
• Any debt or outstanding liabilities.
• The specific costs associated with your death, mentioned above

Use Life Insurance to Build Generational Wealth

This is the bonus you get for reading this far: Life Insurance can also help build generational wealth. Because it’s much cheaper than its payout, you can pass on a lot of money you don’t have. Here’s an example (real numbers):

I have a 20 year, $500,000 policy that costs $50/month.

My total cost will be $12,000.

My heirs receive half a million dollars.

If I die at the very end of the term, $12,000 of my family’s new wealth comes from my contribution premiums, and $488,000 magically appears from the insurance company. It is wealth my family did not previously have.

Don’t feel bad for taking the insurance company’s money. It’s kosher. They have spread their risk over a lot of people and have A LOT of data to know how many will die while the policy is active.

Based on your circumstances, it may be a boost for your family to purchase a longer term of insurance than you need to cover costs. Your adult children can help contribute to the premiums. It’s an efficient way to lift a generation. 

Should You Consider Whole Life Insurance?

Whole life is more expensive and more complicated. Like The Budgetnista, covers in her excellent book Get Good With Money, we don’t recommend whole life insurance for single moms, or for 99% of people. Why?

• It’s not insurance. It’s a complex investment and retirement planning product
• As an investment, the returns are low (less than 2% on average, which sucks)
• It’s expensive
• Insurance brokers get pay much higher commissions on it, so its marketed LIKE CRAZY, but not because it’s awesome

About the only thing, whole life is good for is helping wealthy people shelter their money from tax gains after they have exhausted all other options.

Is It Hard For Single Moms to Get Life Insurance?

No, it’s super easy. But it’s hard to KEEP life insurance. If you’re healthy and not a smoker, getting a policy takes 20 minutes at Bestow. It’s not your cheapest option, but it’s fast.

In terms of getting it, if you have medical issues, you may have fewer options and higher premiums than a healthy lady. Some require you to get a medical exam. I went with one that doesn’t and didn’t shop around. Why? I’m a mom and I’m busy as hell. The “experts” who say “go shop for life insurance in person and make sure to get an exam” are full of shit. The greatest risk to your life insurance is you.

Most term life insurance policies lapse before they are paid out. That’s how insurance companies make money. People lose track of them. Financial crises happen, and paying the life insurance isn’t as immediate as keeping the heat on. 15 years in, people lose or change perspective.

Make paying it a priority. Set up autopay from your bank, not the insurer, and keep a grid of your insurance. If you need help paying it, ask for help. Life insurance isn’t just an important safety net, it’s an important wealth builder.

Car Insurance for Single Moms Is More Expensive. Not Kidding.

Car Insurance is a necessary evil. But did you know single drivers pay more? According to Zebra.com, “On average, a married driver pays $160 less per year for car insurance than does a single, unmarried driver. While being married doesn’t necessarily make you a better driver, historical data show married couples are more likely to share driving responsibilities than single people.” This offsets some of the benefits single moms get for being women – we tend to have better driving records and therefore rates.

How Credit Score Impacts Your Car Insurance Premiums

However, the biggest determinant of your car insurance premiums is not your gender or your marital status, but your credit score. While being single will jack up your premiums by $160 annually, having a bad credit score will cost you $800.

(If you’re trying to improve your credit score, go follow @RoadTo750. She’s awesome)

Here’s how car insurance works, so you can find the right policy for your family.

Insurance companies will assign a risk level for each driver based on factors like driving record and year, make, model, and mileage of the car, as well as the demographic info we already discussed.

Then, you set limits for different types of coverage. More coverage = higher premium.

Bodily injury and property damage liability

If you’re in an accident that’s your fault, bodily injury liability covers the expenses of others’ treatment, up to the limits of your policy. Property damage liability pays for damages you cause to someone else’s car or property.

Most states require drivers to carry this type of insurance, to prevent you and your teenage drivers to become a menace to society.

Medical payments or Personal Injury coverage:

If you or your passengers are injured, this coverage will pay their medical expenses. Insurance companies usually require drivers to carry $5000 of this type of coverage, but it’s a good idea to have more if you can afford it.

Comprehensive and collision coverages:

Comprehensive pays for damages to your car that result from incidents other than collisions. Collision covers damage from a collision with another object or vehicle, including rollover. This is for when you get rear-ended

These are optional types of coverage.

Rental car coverage

Meh. If you can borrow a car for a week, skip it. Otherwise, you might be able to get a deal via Hotwire. You might also have this through AAA if you have that. Don’t feel pressured.

How to save on car insurance as a single mom

I have worked in the call center for a major car insurance carrier, and I’m here to tell you, those sales agents have your back and have seen it all. The best way to save money is to have a back-and-forth conversation with them and ask as many questions as you need to. An agent can tailor a policy that works for your budget and protects you, and you can choose a higher or lower limit for each type of coverage.

1. Shop Around – Once you have structured a policy that works for you, call Geico and USAA and have them quote you for the identical policy.
2. Bundle – that Progressive commercial on the beach about bundling, aka buying all your insurance through the same provider, it’s true. If you get your car, renters/homeowners, etc. through the same company, it reduces your premium because they know you are generally lower risk. So don’t spread it around.
3. Tinker with Your Deductible – you can make your premiums more affordable by raising your deductible (the amount involved in an accident you have to pay out of pocket before your insurance kicks in).
4. Keep a clean driving record, especially one free of driving drunk or illegal drugs. Insurance companies are not allowed to raise your rates based on race, national origin, religion, or (directly) gender, but they will raise them for tickets and accidents.

Best Car Insurance for Single Parents

I don’t have all the data on this, but anecdotally, Geico and USAA tend to be the least expensive. FWIW, Geico has excellent customer service.

(I have been a GEICO customer a long time and carry all my insurance through them or subsidiaries, but they don’t pay me, nor does AA).

Final Thoughts for Single Mom Warriors

If you made it this far, what an amazing parent you are. That’s commitment!

With so many responsibilities and risks to manage, it’s important that you keep your finances secure with a strong safety net in place. We hope these tips will help guide you towards an informed decision about what type of coverage is right for you.

Sign up for early access to the AskFlossie community, where you can link up with other women who are going through the same life challenges you are. You’ll find numerous other single moms who can give you personal advice on how they make life insurance works for them.