What is term insurance?
Term life insurance is the simplest and the most cost-effective form of life insurance available in the market. It is a pure life cover, which ensures that your family’s life goals such as your children’s education or their marriage are not disrupted even in case of anything untoward happening to you. This is why a term policy should be an important part of your long-term financial goal-setting plan.
When single parents opt for a term policy, their nominees are eligible for a death benefit that can help them maintain a stable lifestyle after the death of the policyholder. For instance, let us suppose that a single parent purchases a term insurance cover for self of Rs. 1 crore, for a policy term of 20 years and pays the premiums regularly. If the policyholder dies within those 20 years, the insurance company will pay out the entire sum of Rs. 1 crore to the /nominee or legal heir of the policyholder, which, in this case, would be the child of the insured person.
Now that we have established how a term policy can be beneficial, single parents may be wrought with the dilemma of how much of a life cover they need to purchase. Let us get into those details.
Why do single parents need life insurance?
Raising a child alone comes with a set of responsibilities both emotionally and financially. For single parents, life insurance is not only necessary, but an assurance for the child in case any misfortune happens in the future. In the event that there is only one parent bringing in the income, the loss of life suddenly leaves the child without means for necessities such as education, residence, and even day-to-day care.
Life insurance assists in creating a safety net. A sufficient sum assured can help with financial responsibilities like bills etc and make sure the child has a financially stable life. That makes term insurance for parents an important financial decision for anyone who is bringing up their child on their own.
Premiums for life insurance can be affordable, especially when taken out early. It's also flexible. You can choose the coverage amount and policy period based on your child's age and financial needs.
Single parents tend to bear the weight of doing everything alone. With the proper coverage, they can feel free of anxiety regarding their child's financial security. Whether the child is attending school or getting ready for college, term insurance for single parents could provide significant protection and peace of mind in trying times.
Factors that can help single parents determine their term insurance coverage
For single parents who are not sure about how much term life insurance they need to purchase, a term insurance plan calculator can prove to be extremely useful. This is because the exact amount of life cover needed varies from one policyholder to another. With a term insurance calculator, single parents can input their individual details and receive a quote about the adequate amount of coverage to opt for.
Aside from that, there are also some factors that can help single parents determine the term life insurance coverage they need. Here is a closer look at these factors -
The annual income
How much a single parent earns on an annual basis is a key influencer when it comes to determining the adequate level of coverage needed. This is because the annual income is a crucial indicator of how much the family needs to sustain itself year after year.
The needs of the child
Single parents also need to look into the requirements of their children in the years to come before deciding on the adequate level of coverage. Mapping out the possible life goals like higher education can help parents get a better idea of the costs that need to be met in order to fulfill those life goals.
The level of current debt
In case of anything untoward happening to the earning member of the family, it falls upon their beneficiaries to settle any debts or liabilities remaining in the name of the deceased person. For this reason, the cover purchased must be sufficient to cover all current debts in the name of the single parent, so their nominees do not have to bear the burden of repayments.
The choice of additional riders
Some insurers and some term plans give the policyholder the option to enhance the cover with additional riders at a nominal extra cost. This also needs to be taken into account when single parents are looking at how much of a cover to purchase. Depending on the choice of riders made, they can come in handy in case of any accidents, disabilities or critical illnesses.
Inflation
Due to inflation, the amount of money needed to meet the needs of a family today will not be the same amount needed to maintain the same lifestyle in the future. It will be more expensive, and so, single parents need to account for this while calculating the life cover needed for their children’s future.
Why Life Insurance is Essential for Single Parents: Top 3 Reasons
Life insurance provides single parents with the chance to financially protect their kids' future. It helps to cover basic needs, build savings discipline, and make term insurance for parents a responsible financial choice.
Here are three key reasons why it is essential:
To support your dependents
Single parents are often the only source of financial support for their children. If something happens to them, there should be enough money to cover the child’s daily expenses, school fees, and other essentials. Life insurance offers that support. It gives a fixed amount called the sum assured to the nominee which can be the child or the guardian if the parent (i.e the life assured) passes away during the policy tenure and subject to other policy terms and conditions. This can reduce stress and help the child maintain stability. Choosing term insurance for parents can make this support more affordable and simple to manage.
Save taxes
Life insurance can also help you lower your annual taxes as a single parent. The premiums paid for life insurance allow tax deductions under Section 80C of the Income Tax Act under old tax regime. This means parents can secure their child's future and save money on income tax. It is one of the very few plans that offer financial security and tax savings. When chosen early, term insurance for single parents can be a practical option to manage both.
Habit of saving
Life insurance programs can be a useful way to create a regular habit of saving money. When a single parent prioritizes paying their premiums on time, they are effectively putting away a set amount of money regularly. This forms a discipline with future planning, but also provides money for the parent to use later, or the policy may have maturity benefits as per the policy. For single parents who have to manage finances, this savings habit can provide long-term advantages. It promotes planning for future requirements, rather than emergencies, and serves to maintain the focus on stability.
Conclusion
With a term policy in place, single parents can be rest assured that the future of their children is taken care of to an extent, at least as far the finances are concerned. This brings some peace of mind to the earning member, whose main priority is to ensure that their dependents are protected.
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