If you're the sole earner and provider for your family, every dollar counts, especially when you’re going through a difficult time like the COVID-19 pandemic. 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
A child is dependent on your income so you’ll need life insurance. A general rule of thumb is to get a policy that’s worth at least 10 times your annual income. For example, you may get a $500,000 policy if you earn $50,000. However, the amount of insurance you need really depends on things like:
- how much debt you have, and
- your expectations for the money (e.g., how long it needs to last).
You can make your kid(s) the beneficiary or beneficiaries of the policy. This way, they’ll receive the death benefit after you die. 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.
Generally, you name a trustee like your child’s other parent, a grandparent or other relative. They can look after the money on your child’s behalf until they reach a specified age. It’s often but not necessarily the age of majority. (In Quebec, tutor of a minor child receives the policy funds, rather than a trustee.)
Are you receiving child or spousal support? Make 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 now offer to meet or consult with people by phone or video chat. Find an advisor near you.
2. Disability insurance for parents
Disability insurance may provide you with income if you:
- become disabled and
- 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, plus the potential of getting coverage through other sources.
What if you work on contract with no benefits? Talk to an insurance advisor about your disability insurance options.
- How will you live if you can't work? Here's how disability insurance can help.
3. Critical illness insurance (CII) for parents and kids
Critical illness insurance pays out a lump sum in the event you’re diagnosed with a covered, life-threatening illness such as cancer, heart attack or stroke. You’ll receive a lump sum, after diagnosis.* You can then spend this money any way you wish. (*The sum you receive may be subject to certain conditions, such as having to survive for a specified length of time.)
You may wonder whether the latest coronavirus, COVID-19, is covered. It depends on your insurance company. For example, Sun Life covers Clients who suffer a covered critical illness after contracting COVID-19.
CII was an invaluable product for Louise, 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, Louise had critical illness insurance, and received $100,000 from her policy. This allowed her to hire extra childcare, pay down her mortgage and keep up with overall expenses for herself and Owen while she was undergoing chemotherapy treatments. Having the extra money meant she didn’t have to dip into her retirement savings.
- Find out how a serious illness could affect your finances. Try this critical illness calculator.
Also consider taking out a critical illness insurance policy for your child. Let’s say Owen is the one who was seriously ill. Louise can then use the money from the CII policy for various expenses, including drugs not covered by provincial health plans.
4. Accident insurance for parents and kids
Accidents happen every day. We can’t predict when or if they occur, so it’s best to be prepared. This is where accident insurance comes into play. A serious accident could affect your ability to work again. Coverage is available up to $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 typically inexpensive, costing less the younger a child is. They can provide significant base coverage ($250,000, for example). It may also provide the opportunity to buy additional insurance in the future, regardless of their future health or lifestyle.