Are you a single mom wondering how much life insurance you need? You’re not alone. It’s an important question to ask, especially if you’re a single mom. How much life insurance do you need? And what are the best policies for your family’s needs? Don’t worry, we’ve got you covered. 

Getting term life insurance for single moms is relatively simple and inexpensive, and it’s critical for building generational wealth and giving your family almost immediate cash flow during their transition to a new life.

In this blog post, we’ll give you some tips on researching life insurance policies, and give you some tips on how to find the right policy that fits your budget. So read on – life insurance doesn’t have to be scary!

Life Insurance For Single Moms – The Basics

I wrote a complete life insurance guide for women last month. The quick takeaways:

  • You need term life insurance, both to cover costs and to build generational wealth
  • Term life is quick, easy, and inexpensive
  • Your kids can inherit your debt, including final medical expenses
  • There are a lot of “transitional costs” between when you die and when your kids are settled in a new life
  • Even if you want to be cremated and nothing fancy, funerals are expensive
  • Unless you are Kris Kardashian, you do not want whole life insurance. It’s a complicated investment product, not insurance.
  • Don’t take insurance advice from an insurance salesperson
  • Most insurance policies lapse due to non-payment, so set up autopay from your bank, not your insurer, and ask for help paying premiums if you need it. 

What is life insurance and how can it help you?

What is term life insurance?

Term life insurance protects your cash flow, so your family can have some money to help them cope with the loss of a financial provider. The policy pays out when you die to whomever you name as a beneficiary. The payout is usually a lump sum, which can help your family cover immediate costs like funeral expenses and outstanding bills. It can also help them maintain their current lifestyle or provide for future costs. 

Term life insurance is good for single moms with kids at home because it’s affordable and covers a set period of time, eg. until your kids have launched. It also has flat premiums, so if you pay $10/year in the first year of the term, you also pay that in year 20. Predictable and great for inflation. 

What are the benefits of term life insurance?

There are three primary benefits to having a term life policy:

  • Protection in case something happens to you and your family needs money immediately
  • The ability to build generational wealth, as the death benefit is paid out to your heirs tax free
  • The ability to cover final expenses, including outstanding medical bills

Should I buy term or whole life insurance?

Whole life insurance or permanent is a complex product that combines life insurance with an investment. This can be useful if you want long-term, low risk savings or a slush fund for your family, but the fees are high, the product is complex . 

Term life insurance is cheaper, much easier to understand and doesn’t have hidden bells, whistles or fees. The only cash value you get with term is when it pays out on your death – so it makes more sense for most single moms looking to protect their kids in case of their death.

Whole life can be very expensive compared to term, but in certain situations for the wealthy, it can be a beneficial investment product and tax saving tool. 

But really, as Tiffany Aliche The Budgetnista says, unless you have Beyonce money, you want Term Life. 

Life Insurance For Generational Wealth

Pretty sure you know the original point of life insurance for single moms is to cover costs, but it is also an extremely good way to build generational wealth. Extremely. Because life insurance premiums are much cheaper than the death benefit 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 kid did not previously have.

I put this first because we too often focus on life insurance to cover costs. Yes, that’s important, but for single moms life insurance is a powerful wealth game-changer. And Generational Wealth Building is possible for single mothers. After you figure out what your kids will need, boost your coverage or term to increase their wealth. Now, let’s figure out the baseline.

How much life insurance does a single mom need?

A lot of numbers get thrown around – two or three times your income, at least $250K. There are two ways to approach it: buy as much as your budget will tolerate or calculate your need. I’ll cover how to calculate it below, but you might not even have to. Term insurance starts at $10 a month. At $50/month, I have a $500,000 dollar death benefit. In the grand scheme of things, it’s really cheap. 

Coverage Amounts For Single Moms With Kids At Home

That being said, if you want a rule of thumb: at least ten times your annual income. This is because if a single mom were to die unexpectedly, this amount would be enough money for their children’s basic needs such as food and housing until they become adults.

A common mistake that many women make when purchasing life insurance policies is choosing too low of a death benefit payout so always err on the side of caution by going with more rather than protection for your family’s future.

How Old Are Your Children?

How old your kids are helps determine how much life insurance coverage you’d need. The younger your kids are, the longer term you’ll want.

A term life plan sets coverage for a certain period of time. You could make this extend for just 10 years, or go all the way up to 30 years. The term you choose should cover at least until your kids are 22, and longer if you are using the policy to build generational wealth.

What Do Your Kids Cost?

What does it cost you now to provide for your kids? How will those costs change between now and the end of the term? This is where you want to be comprehensive. Include

  • Costs to care for and maintain your kids, similar to what you pay every month in rent, food, etc.
  • Costs for education, after school programs and college
  • Include housing costs, if you think the guardian might need to move
  • Other special expenses you were hoping planning to help with, like a wedding or house
  • Add in extra costs for childcare and other areas where their guardian might not have as much help
  • If your child has special needs, that will change the math as well

Similar to the wealth building opportunity, these costs also present an opportunity to level up. It can help you pay for things you might not be able to afford otherwise, because the premiums you pay are less expensive than, say, college.

How Much Debt Do You Have Right Now?

Some debt is inherited. Full stop. You don’t want to leave your grieving kids and their guardian with debts they can’t manage.  Here’s how to tackle it!

Like everything with estate planning, debt inheritance varies by state, so double check your state and situation. Your “estate” would typically settle your outstanding debts. In other words, any assets you held at death will go toward paying off what you owed at that moment.

However, if your estate can’t cover it, it’s possible your kids will inherit the debt.

  • Anything you cosigned for, or debt on a shared account will definitely be inherited
  • Debt from home equity loans is generally inherited.
  • Medical debt can vary. Its inherited by default because lots of people die in the hospital, but may be waived. Check your state details, talk to the billing department and do a little research. 
  • Probably won’t see hospital expenses coming. I factor in a little buffer. 

Funeral, Transitional, and Legal Costs 

I cover this pretty extensively in my Complete Guide to Life Insurance For Single Moms, so check that out. But remember, this change is expensive, may require moving and travel, and many other “unusual expenses”. Think it through. 

What Would Life Insurance Do for Your Guardian?

You absolutely should designate a guardian for your children. This takes it out of the hands of the court to make that call. Once you know who the guardian is, look at their financial situation. If they are going to live with a wealthier relative, you might not need as much coverage. On the other hand, if you are leaving them with a grandparent on a fixed income, you might want to beef up your policy. 

Even so, everyone has their own financial challenges, and they’re usually hidden, so it’s best not to gamble. Even if you are leaving your children to Daddy Warbucks, leave an insurance payout. 

How much does life insurance cost?

Life insurance rates can vary depending on age and health status. The younger you are, the less expensive life insurance will be. Term life premiums remain level for a specific period of time (“the term” typically between 15-30 years). This makes it easy to budget long term with this type of product.

When shopping for life insurance, it’s important to consider both the cost of the policy and its coverage amount. The premium is the monthly cost of your policy. You can often lower this amount by raising or lowering your coverage level.

The coverage amount, also known as face value, represents how much you would receive if you died and had an insurance claim filed under your life insurance policy

Can I find affordable life insurance on a budget?

The answer is yes. Generally, the best way to find affordable life insurance is to shop around and compare rates from different insurers simply by calling them. You can also get quotes online or through an insurance broker. It won’t hit your credit report.

Another option is to purchase life insurance through an association or professional organization you belong to. Many associations, such as unions, offer discounted rates on life insurance policies for their members.

Finally, if you have access to employer-sponsored health benefits, be sure to check out the life insurance options available through your plan. Many employers offer group life insurance policies at reduced rates, and allow you to add coverage for an additional premium. 

Buy a policy when you are young and healthy. This will ensure that you get the best rates possible.

Shop around for the best rates. Don’t just go with the first policy you find.

How Does Life Insurance Work and who gets the money?

When someone dies, the life insurance company pays out a death benefit to the beneficiary named on the policy. This money can be used to help cover funeral expenses, pay off debts and other final costs, or simply provide financial security for loved ones.

Who should you name as the beneficiary of your policy?

Many parents want to name their children as beneficiaries of their life insurance policies. However, it is a bad idea because a minor cannot lawfully accept life insurance funds and the payment can be delayed in legal actions for months. 

Instead, name the intended guardian of your kids as beneficiary or create a trust and name it as the beneficiary. You can specify a lot of constraints about how the money is used and a trustee will carry out your instructions for the benefit of your kids and their guardian. 

Protect the death benefit for your child

There are two common ways death benefits get lost: the policy lapses from nonpayment or the policy gets lost. The solution is to avoid either situation.

Whenever possible, pay the premium directly from a credit card or line of credit so that you have proof of payment should your policy lapse for nonpayment. Keep in mind that if you default on your payments, many policies become void after 30-90 days without payment and will not be reinstated once they are again current.

Another good method is to set up automatic payments initiated from your bank account or payroll. The easiest way is for premiums paid in advance with monthly or quarterly installments (quarterly billing options can be limited). All of these methods will help ensure that your coverage stays current and does not lapse.

On the flip side, It’s vital for single parents to talk about their end-of-life plans with their child’s guardian and other loved ones. Give someone you trust information on where to find important documents like your life insurance policy and contact information for any attorneys or financial advisors you’ve worked with.

Single Mom Life Insurance FAQs

Let’s cover some (Great!) questions I hear a lot:

What does life insurance cover?

  • Death benefit: this is a payout to the beneficiary of the policy in the event that the insured person dies.
  • Burial expenses: many policies will cover burial or cremation expenses.
  • Final costs: life insurance can help pay off debts and other final costs.

Is life insurance taxed?

No, the death benefit from term life is not taxable. 

Can you have multiple life insurance policies?

Yes, it is possible to have multiple life insurance policies, and they can have different beneficiaries. For instance, you can have coverage through your employer (sometimes for free) and purchase additional coverage privately from another company. The death benefit from each policy will be paid out separately and not together.

Can you pay for life insurance with a credit card?

Some companies let you make monthly payments on your policy through automatic drafts from your checking account or by charging your credit card.

Can you get life insurance on anyone?

No, you can only get life insurance on someone who is eligible, and in whom you have an “insurable interest”. This usually means that the person must be in good health and between a certain age range.

One additional consideration for single moms, is to get life insurance on an ex who is paying child support or alimony.

Single mothers with pre-existing conditions may not be able to get affordable coverage, and women who are in the late stage of pregnancy may need to wait until the baby is born for coverage to begin.

Single Mom Life Insurance Myths

Myth: you don’t need life insurance if you’re young and healthy.

Reality: The older we get, the more expensive life insurance premiums become. When we are young and in good health, it is much easier to qualify for a policy at lower rates than if we wait until later in life when an illness may develop. 

Myth: your life insurance policy through work is enough.

Reality: Many people do not realize that the life insurance policy they receive through their employer is supplemental to what they need. The death benefit of a work-provided policy will never be enough for your family’s needs, and it may lapse if you are unemployed or between jobs.

Myth: life insurance is too expensive.

Reality: Term life insurance is very affordable and can be purchased for as little as $10 a month.

Myth: why pay for life insurance you may never need?

Reality: Sometimes financial health is not investing to grow. Sometimes, it’s about preventing a financially devastating loss. That last one is insurance. 

Life insurance is just like any other kind of insurance in that you pay for it knowing that there’s a chance you will never need to use it. It can be very comforting to know your family would always have money available if the worst were to happen.

Myth: Life insurance is a scam

Reality: Insurance companies are highly regulated by state governments and must adhere to very strict guidelines. Additionally, since the crash of 1929, no insurance company has ever gone under.  If it’s a company you have ever heard of, you’re probably good. 

One caveat tho: I have seen whole life/permanent life targeted to people for whom it is not an appropriate product (hi, Instagram) and I have heard of cases where low-income communities were targeted, to their detriment. It’s possible for the death benefit to be less than your total premiums paid with whole life. You can pay for 30+ years and have no additional growth to show for it. The complexity is what makes it dangerous for people who don’t understand it, and why I don’t recommend it (or own it). 

Do I need life insurance if I’m a full-time stay-at-home mom?

Many people assume that stay-at-home moms don’t need life insurance, but not true!

If your primary responsibility is Chief of Home Operations, you require the same level of Life Insurance as a working woman – maybe even more. You’re a driver, a chef, a cleaner, a caregiver, a decorator, a personal shopper, an executive assistant to your entire family, and so much more. Every bit of unpaid labor will need to be replaced.

Yes, your family will make up the difference, but not permanently and certainly not without cost. Funding these costs using a term life insurance policy not only makes your family’s future life simpler, it’s also an excellent exercise to remember the value of what you do every day. We’ll get into how to calculate it later.

Medical Exams and Life Insurance

Most insurance companies will require a medical exam in order to qualify for an affordable policy. If you do not pass the exam, your premiums may increase significantly and some insurance carriers may deny your application outright.

In addition to medical exams, some carriers will require a blood test and urine sample. If you have been diagnosed with an illness or condition that could prevent the insurance company from paying your claim, they may ask for additional information before issuing a policy.

Best life insurance for single moms

There is no one-size-fits-all answer to this question, but the best life insurance for single moms is probably a policy that provides a large death benefit at a low cost. Term life insurance is affordable and can be purchased for as little as $10 per month.

Join Us!

It’s not the only thing we think about but we have a lot of resources on Life Insurance for Single Moms on our Blog. Sign up for early access to the AskFlossie community where you can meet other single moms going through similar challenges of finding the right life insurance policies.