Life insurance for single parents
Many single parents in the United States are going without life insurance — and are putting their kids at risk by doing so.
A 2011 study from Genworth Financial shows that 69 percent of American single parents don’t have life insurance, compared with 45 percent of married parents with kids living at home. Moreover, the more kids a single parent has, the less likely the parent is to have life insurance. Single-parent households with five or more children were drastically more likely to be uncovered.
These findings came as a surprise to Gregory Bucko, director of customer innovation at Genworth Financial. According to Bucko, single parents are arguably the group most in need of life insurance, yet they’re among the least likely to have it.
What’s keeping so many single parents from investing in life insurance? Here are four key reasons.
1. Single parents think life insurance is too expensive.
According to the Genworth study, many single parents believe they can’t afford life insurance.
“You’ve got the economy down, and that’s a big reason why life insurance ownership is down,” says Catherine Theroux, a spokeswoman for LIMRA, an association of insurance and financial services companies. “The thing is, it’s single parents who need life insurance most. But they’re often at a financial disadvantage in raising children with only one income.”
But life insurance isn’t always as expensive as many people think.
“Term insurance, for example, is very cost-effective for most people with young children,” says Robert Ryan, president of Ryan & Ryan Insurance Brokers in Kingston, N.Y. “That’s especially true for single parents under age 50.”
For single parents who want to ensure that their kids still can go to college even if the parent is no longer around, term life insurance can offer valuable protection, Ryan says. A 20-year term life insurance policy worth $125,000 can be purchased for less than $10 a month, according to personal finance author and radio host Dave Ramsey.
2. Single parents say they’re too busy to shop for it.
According to the Genworth study, many single parents claim they don’t have the time to shop for something as complicated as life insurance. Weighing their options and doing the necessary research requires time that they say they simply don’t have.
“We find that many single parents are simply too busy — or even too scared — to properly evaluate their life insurance needs,” Gregory Fairchild, associate professor at the University of Virginia’s Darden School of Business, says in a news release about the Genworth study.
This state of mind is an “understandable” one, according to Fairchild, because single parents don’t have a partner to provide help and financial security.
3. Life insurance is too complex.
Bucko says many single parents cite the complexity of life insurance as a reason they didn’t invest in it. Life insurance is available in several varieties, and policies are filled with industry jargon.
“We see … the complexity as an opportunity for the insurance industry to do a better job of educating single parents,” Bucko says.
4. There’s a gender gap among buyers.
A study by LIMRA shows that when women do get life insurance, they tend to purchase less coverage than men. On average, their coverage levels are just 69 percent of that for men. Women also are much more likely to be single parents than men, so this is an important reason that single parents are more likely to go without life insurance or be under-insured.
The good news, according to LIMRA, is that more women appear to be coming around to the idea of life insurance. According to the study, 70 percent of women say that they value life insurance, while only 62 percent of men say the same.
“Overwhelmingly, (women) are making or helping to make the financial decisions for their families,” Retzloff says in a LIMRA news release. “This is a great opportunity for our industry to redouble their efforts to reach out to women to ensure their families are adequately protected against the financial repercussions of the death of a wage earner.”
Experts agree that single parents need life insurance more than two-parent families do — even though they seem reluctant to get it.
“There is a growing number of single parents in the U.S., and the lack of life insurance is becoming a big issue for our industry and our country,” Theroux says. “In fact, I can’t imagine a population that needs life insurance more.”