If you're the sole earner and provider for your family, every dollar counts. That’s why, as a single parent, you may want to consider the following health and life insurance options:
1. Life insurance for single parents
If a child is dependent on your income, you should consider life insurance. As a general rule, you should take out a policy with a coverage amount equivalent to at least 10 times your annual income. For example, a $500,000 policy contract for a $50,000 salary. However, the amount of insurance you need will depend on a number of factors. These include:
- how much debt you have, and
- your expectations for the money (for example, how long it needs to last to support your children).
You can make your child(ren) the beneficiary(-ies) of the policy. This way, they’ll receive the death benefit. The death benefit refers to money paid to a beneficiary in the event of an insured person’s death. It’s usually tax-free and provided in a lump sum (one single payment).
This life insurance calculator will help you estimate how much coverage you need.
However, you must appoint a trustee if your children are minors. That person will look after the money on your children's behalf until they reach a certain age. For example, it could be your children's other parent, a grandparent or a family member. This predetermined age is often but not necessarily the age of majority.
Note that in Quebec, the tutor of a minor child receives the policy funds, rather than a trustee.
Are you receiving child or spousal support? Consider making arrangements for those payments to be insured as well. Why? Let’s say something happens to your ex. There may not be enough money in their estate to cover any ongoing support obligations.
- You can talk about insurance with an advisor. They can explain all your options and answer questions you may have. Most advisors can even meet people over the phone or by videoconference. Find an advisor near you.
You can also submit a simplified application for life insurance online with Go Sun Life.
2. Disability insurance for parents
Disability insurance may provide you with income if you:
- become disabled, or
- are unable to work for longer than a specified period.
To qualify for disability insurance, you’ll need to have steady income already established. Most workplaces offer some disability coverage. But what if you lose your job? Then you’ll lose that coverage.
What if you work on contract with no benefits? Talk to an insurance advisor. They’ll give you details of your disability insurance options.
3. Critical illness insurance (CII) for parents and kids
Critical illness insurance (CII) pays out a lump sum in the event you’re diagnosed with a covered, life-threatening illness. This includes cancer, a heart attack, a stroke, and more.
The policy requirements for an illness must be met for the lump sum to be payable. For example, survival for a specific period. You can then spend it as you wish.
You can apply for Express Critical Illness Insurance online.
CII was an invaluable product for Louise, the single mother of eight-year-old Owen. She was diagnosed with breast cancer and had to take a leave of absence from her job. Her employer paid her for three months through a short-term disability plan. But Louise missed work for more than a year. Fortunately, she had critical illness insurance, which paid out $100,000. She was then able to pay for additional childcare. She also paid off her mortgage and covered her daily expenses while undergoing chemotherapy. Having the extra money meant Louise didn’t have to dip into her retirement savings.
Find out how a serious illness could affect your finances with the critical illness insurance calculator.
Also consider taking out a critical illness insurance policy for your child. Let’s say Owen is the one who had a covered illness. Louise could have used the money from the critical illness policy to pay for other expenses. These might include purchasing drugs not covered by the provincial health insurance plan.
4. Accident insurance for parents and kids
Accidents happen every day. As they are unpredictable, it's best to be prepared for any possibility. This is where accident insurance comes into play. A serious accident could affect your ability to work again. Fortunately, with this insurance, the sum insured can be as much as $250,000.
It may also be wise to get accident insurance for your children. It can help pay the bills if your child has a serious accident and you need to leave your job to take care of them.
5. Life insurance for your kids
Children's life insurance policies are generally not expensive. The younger the child, the lower the premium. They can provide significant base coverage ($250,000, for example). They can also be used to purchase additional insurance at a later date, regardless of the insured's health or lifestyle.
This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.