My sister and I were talking recently about the things you have to think about when you become a parent, and more importantly, a single parent when all the responsibility for your child’s way of life falls on your shoulders. Household budgets for the single parent are often tight, relying on one income or benefit supplementation just to get by. As a result, taking on another outgoing such as life insurance can be a struggle.
Today I welcome Gemma, a single mum of one who works in the life insurance industry, here to explain why it is important to have life insurance as a single parent and how to avoid it breaking the bank.
“When I first became a mum arranging life insurance was always on my to-do list, but as with all new parents, life got busy and the to-do list fell by the wayside.
When my daughter turned 3 and I unexpectedly found myself as a single mum, budgets got tight and taking on another monthly outgoing such as life insurance simply seemed impossible.
It wasn’t until I started working for Reassured, the UK’s largest life insurance broker, that I realised just how wrong I was.
As I began to settle into my new role, I began to learn just how important life insurance actually was.
There were a lot of things about being a single mum without life insurance that I hadn’t considered, so I want to share with you why I believe it’s so important to have life insurance and also how to make it more affordable even on a small household budget.
If I were no longer around…
No parent likes to think about what would happen to their children if they were no longer around.
Fortunately, whilt the emotional void of losing a parent can never be replaced, the financial instability of the whole scenario can be minimised.
When you die, any outstanding debt in your name needs to be cleared, the cost of your funeral needs to be covered and that’s all before considering the ongoing daily life costs of your little ones (mortgage/rental payments for their home, utility bills, food, hobbies and other lifestyle outgoings to name just a few).
As a single parent, all of this is required to be paid out of your estate and with the cost of a funeral rising by 122% over the last 15 years, it is easy to understand how the value of your estate can rapidly diminish.
Without the means to pay off your mortgage or keep up with monthly rent, your children may also be required to move home, causing even more distress at an already difficult time.
Finally, their ongoing lifestyle will need to be funded from somewhere. If you are lucky, you will have a support network willing to help maintain your children’s current lifestyle. But if the funds aren’t available this could require your children to undergo a complete lifestyle change.
When I discovered all of the above, I knew I needed to take some action to ensure if I was no longer around my little girl would remain as undisrupted as possible financially.
So, what’s the answer?
The answer is of course life insurance.
By having adequate cover in place, if the worst were to happen, you can ensure that the financial stability of your loved ones remains intact.
When arranging my life insurance, I took into account all of the above to help me determine exactly how much cover my little one would need to continue her existing life – Allowing her to be able to focus on moving forward without a mother.
However, like most single parents, how I was going to afford the required cover was a worry. Budgets were tight, however, I was lucky enough to work in the industry (no, unfortunately, it didn’t get me any discounts!), but it did give me an insight into how to make cover as cheap as possible.
Don’t break the bank
The cost of life insurance premiums are calculated on the amount of risk you pose to the insurer – The more likely you are to make a claim, the more you pay on a monthly basis.
Therefore, if you can minimise this risk, you’ll save yourself valuable money.
- Take out cover as young as possible
- Lead a healthier lifestyle
- Don’t over cover yourself
These are the three key rules you need to follow.
Those who are younger tend to have longer life expectancies and have suffered less health issues.
Therefore, arranging cover as early as possible in your life will allow you to draw upon the benefit of your younger age and good health and reap the benefits in the form of lower cost premiums.
Secondly, the healthier the lifestyle you lead the more likely you are to outlive your life insurance policy meaning you are less of a risk to the insurer.
Being overweight and smoking are two factors which will increase the cost of your monthly premiums but are also easily manageable.
Unfortunately, insurers class you as a smoker for 12 months after smoking or using nicotine replacement products, therefore the sooner you can quit the better.
Equally, if you quit smoking once you already have cover in place, it is a good idea to inform your insurer as they may reduce the cost of your premiums as a result.
Maintaining a healthy BMI also indicates to the insurer that you are in good health, therefore managing your weight to ensure you are within the ideal range when applying will help you secure lower monthly premiums.
Finally, I understand it can be tempting to secure as much cover as possible to provide the best financial stance for your children. However, the larger the sum assured (covered arranged) the more you will pay on a monthly basis.
Therefore, to ensure you aren’t paying any more than you need to, it is a good idea to work out exactly how much cover you require and only arrange this amount.
A final note of good news is that life insurance is available for as little as 20p a day, giving you an indication of just how cheap cover can be.
Always compare quotes and you’ll be sure to find something within your budget – Some cover is always going to be better than no cover at all.”
I hope this offers some insight into an area that can be really intimidating and hard to get your head around. I know I spent so long not knowing what to do that I just did nothing, and it was only when my own mother died and I realised the costs of even a ‘cheap’ funeral can be crippling, that I decided – just as Gemma said – some cover is always better than no cover.