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A Huge Single-Parent Mistake: No Life Insurance

By Selena Maranjian - Jan 6, 2015 at 3:03PM

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A single parent has a lot of responsibility -- including getting life insurance.

Credit: U.S. Army photo by Lori Yerdon.

An odd thing about insurance is that some people who don't need it buy it, and others who need it don't. Either way it's a costly mistake -- especially if you're a single parent without life insurance.

Here are some startling findings from a 2011 study conducted by University of Virginia's Darden School of Business and Genworth Financial:

  • 69% of single parents with children living at home carry no life insurance.
  • 79% of unmarried men who don't own homes, earn less than $250,000, and have children in the household are not insured.
  • Single moms are more likely to be insured than single dads but are still more likely to not have insurance than to have it.
  • The low rates of coverage were found in most income levels, not just among those on tighter budgets.
  • The more children there were in the household, the less likely it was for the parent to be insured.

Those statistics become even scarier when you consider how expensive it is to raise and educate a child. According to U.S. Department of Agriculture estimates, it will cost a middle-income couple about $245,000 to raise a child born in 2013 to age 18. That's $4,260 higher than the previous year's estimate, and it varies widely by region -- it's close to $455,000 in the urban Northeast and less than $150,000 for low-income rural families.

Then there's college. According to the latest data from the College Board, the average annual price for a year of schooling (and room and board) at a four-year state college for a youngster from that state is $18,943 -- which would top $75,000 in four years if the prices stayed the same. For out-of-state kids at a state school, it's $32,762 per year, or more than $130,000 for four years. Private colleges, of course, cost more: an average of $42,419 per year, or more than $169,000 for four years -- if prices don't change. (Of course, many students get financial aid and scholarships to defray some or much of the cost.)

Clearly, it costs a lot to raise and educate a child. And if you have more than one, it's a lot more.

U.S. Army photo by Lori Yerdon.

Why the low rates of coverage?

So why the low rates of coverage? Some speculate that many single parents (and others) assume that life insurance is costly or too complex to figure out and buy. The other parent can also be a factor, if he or she is currently supporting the child or expected to take over if need be. Some might be counting on Social Security survivor benefits for their children, but note that surviving children under age 18 receive 75% of their deceased parent's benefit -- and that's often not that much. The average full benefit being paid to retirees now is $1,294 per month, or less than $16,000 per year. Seventy-five percent of that amount would be less than $12,000 per year.

What to do

This is a dangerous status quo, with millions of children left at risk. It's hard for relatively young parents, in their 30s or 40s, to imagine dying prematurely, but it happens -- to a lot of people. One in 1,000 strokes happen to people aged 45 or younger. Blogging physicist Brian Skinner did some research a few years ago at age 25 and learned that his odds of dying in the next year were 1 in 3,000. But at age 33, the odds got worse -- 1 in 1,500. At age 42, 1 in 750. (The likelihood doubles about every eight years.)

You might think it won't happen to you, but it might. And it's an awfully big gamble to take with the futures of your dependents. Too many parents, single or not, die without life insurance, leaving survivors to scramble and scrape pennies.

What to do, then, is clear: Get coverage. It may not even cost as much as you think. You can get and compare many quotes online, within minutes. For a 20-year $1 million policy for a 45-year-old Ohio man who is in good health and never smoked, some premium quotes I found online ranged from $100 to $200 per month. You might not need a $1 million policy, either. Each parent's needs are different, depending on their financial situation, the number of children they have and their ages, and their financial goals. You might need less -- or more. Ideally, if both parents are alive, each should carry coverage.

Even if the cost of life insurance seems high to you, the cost of not carrying it as a single parent (or a married one) can be far higher, and very painful. If you're part of the majority of uninsured single parents, it's time to take action.

Don't leave children's financial futures to chance. Photo:

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