Life Insurance and the Single Parent

Michael Franklin |

The decision making process for single parents begins with the traditional question of determining how much life insurance is the right amount. The simple answer to how much life insurance is enough is quite simple. It depends.

So, the first question that you might ask is, “Depends on what?” That’s easy.

Let’s take a look at Pat, age 30, a single mom of children ages 4 and 2 who recently saw an advertisement for $500,000 of 15 year term insurance for $20 per month. She contacted an agent to express interest in buying a policy and asked if $500,000 was the right amount for her.

The agent suggested that Pat ask herself two questions.

In the event of my death:

  1. How much income do I want to provide for my children?
  2. How much cash will be needed to settle my estate and provide additional savings and an education fund?

The agent led Pat through a conversation to determine what was important to her and they determined the following.

Income replacement

Pat does not currently receive any financial support from another parent and there wouldn’t be any upon her death.

Her sister and brother-in-law are her children’s legal guardians and would move into her house if she died. Pat felt that their income combined with her children’s estimated Social Security Survivor Benefits would be enough to provide for childcare and basic monthly expenses as long as her debts were paid.

Debt Payoff and Savings

Pat has a mortgage balance of $170,000 and student loan debt of $40,000. In addition to paying off these debts, she wants to provide another $50,000 to pay for final expenses and set up a ‘Rainy Day’ savings fund.

Her executor would need $260,000 to make those arrangements.

Current Available at Death

If she added the proposed life insurance benefit of $500,000 to her current group life insurance policy of $100,000 and her savings of $60,000, that would make $660,000 available at her death.

Subtracting the total cash needs at death of $260,000 from the $660,000 available at her death, there would be net cash available of $400,000.

Education Savings

Pat is comfortable that $400,000 would be enough to fund her children’s educations.


Based on her financial goals, Pat believed purchasing an additional $500,000 of life insurance was the right amount for her.

But the right amount of life insurance for other single parents may vary significantly depending on:

  • The presence of a second parent
  • Higher monthly income need for basic expenses including full time child care for pre-school age children
  • Proceeds from the sale of the house
  • Higher or lower personal debt and education fund goals
  • Higher or lower current life insurance coverage and savings
  • Special Needs
  • Inheritance
  • Charitable Gifts

A second consideration for single parents is choosing the proper life insurance policy beneficiary for the distribution of the life insurance benefit to minors. It is prudent to seek legal counsel to select legal guardians and an executor and to assure that the proper legal documents are in place for the estate settlement. 


*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2018 Advisor Websites.