Parenting is defined as the most beautiful and rewarding as well as the most challenging job. It is a journey of growth that has its own highs and lows but in the end, brings contentment and accomplishment. But the journey is rugged for single parents. According to a 2019 report by the UN, there are around 4.5 crore single mothers in India.
The expense of raising a child in India, currently, is more than it has ever been, because of soaring healthcare, education, and food costs. According to studies, the average cost of raising a kid is around `40-50 lakh.
Life insurance becomes an even more crucial financial protection for a single parent. A life insurance death benefit can ensure that your children have enough money to maintain their financial security.
Debt & Financial Obligations
Do you owe someone anything? Every parent should consider how much debt and financial commitments they will leave behind when they are no longer alive. If you are in debt, it is always advisable to have life insurance coverage that is sufficient to repay your bills.
Making a Budget to Afford Life Insurance
Before buying life insurance one has to calculate the coverage needs and the amount that one should set aside in the budget to pay for premiums.
Cost of Raising a Child
The cost of a child’s care while the parent is not around is an important element that single parents must consider. Daycare for young children, food, transportation, clothes, and medical care are just a few of the requirements. The amount of term insurance you require is dependent on the needs and age of your child. If your child is young, the amount of coverage will be substantial.
Consider Your Policy Beneficiary Carefully
A single parent is motivated to name the child as the beneficiary, but there are several reasons why this might not be a good idea. The claim will not be paid directly to the minors by life insurance firms. Even if you name your children as beneficiaries, you must also designate an adult for their financial protection. If you don’t set up a trust or make any other formal arrangements to manage the funds, the court will appoint a guardian to administer the funds until the kid reaches 18 or 21, depending on the state.
Claiming Life Insurance Death Benefit
As a single parent, you need to make sure your child understands what to do after your demise. If your children are old enough, they should know where to find your life insurance policy papers in addition to having the phone numbers of your attorneys and significant relatives on file.
How much term insurance do single parents need? This is the second most common question that arises. Let’s take a look at two major factors to consider before purchasing term insurance.
Your Current Debt
If one has any outstanding debts, then after his or her demise, the assets will be used to pay off those bills first. If you still have loans or other debts to pay off, make sure you do it as quickly as feasible. So if one has debt, it is recommended that you either pay it off entirely or raise your term insurance coverage, so that it may cover your debt and leave a certain amount to the beneficiary.
How Much Does the Policy Cover?
One of the most essential factors to consider is “how much of your annual income is covered by the policy.” It’s always a good idea to plan for at least half of your annual income.
The author is Head of Research CapitalVia Global Research Limited