Life insurance is one of the essential financial products for anybody who has any dependents. Young people with retired, aged parents who rely on them for their financial needs, working people with non-working spouses, and parents with children who are in school or college - all of these people may rely on life covers to ensure that their dependents are not left financially weak in case anything untoward happens to the earning member of the family.
By the same coin, single parents also need to purchase life insurance to ensure that the future of their children is secured. For single parents who are looking for an affordable way to purchase a life cover, term life insurance is the answer. To understand how much term insurance single parents need, a term insurance plan calculator can prove to be useful.
For single parents who are not sure what a term policy is and how much cover they need to purchase, here is a handy guide -
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.
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.
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.
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.