Advice on Life Insurance For Single Mums

This article was written by Gemma Holloway at award-winning life insurance broker; Reassured. Gemma is the Head of Content (and a single mum). *This is a collaborative post*

Being a single mum often means surviving on a single income or benefits. This can bring with it it’s own budget constraints, making it difficult to take on additional “unnecessary” outgoings such as life insurance. But is life insurance really “unnecessary” and does it actually have to cause too much strain on the purse strings?

As a single mum, life insurance may actually be even more important than in a two-person family. Without your income, how would your children afford to continue their existing lifestyle? Could they afford to stay in the family home? Whilst it is likely a guardian would step in for their care, without additional financial provisions, it is likely their world would be disrupted significantly, financially as well as emotionally.

Arranging life insurance will provide your children with a lump sum pay out if the worst were to happen to you, reducing the financial strain, allowing them to focus emotionally to come to terms with the loss of their parent. But as discussed, for a household on a single income, this additional outgoing may seem unfeasible.

The good news is, there are a number of steps you can take to ensure you obtain life insurance for the most affordable price possible, reducing the strain it will put on your budget on a monthly basis.

Amount of cover

When arranging protection for your family if the worst were to happen to you, it can be tempting to secure the highest level of cover possible. However, the higher the level of protection, the more you will pay. As a result, it is important to calculate exactly the amount of cover your loved ones would require to survive financially if you were no longer able to provide support.

To do this, you should take into account any outstanding debts in your name (including your mortgage), the cost of your funeral (currently approximately £4,417) and the amount required for your children to continue their existing lifestyle. This sum will then identify the amount of cover you require.

Dependant on personal factors, it may result that this amount of cover is still implausible within your current budget. At this point, you need to consider how much you can afford to pay on a monthly basis and use it as a trade-off to determine the highest level of cover you can afford. Afterall, some financial protection for your loved ones is always going to be more beneficial than nothing at all.

Type of cover

In the UK, there are a number of different types of life insurance; each type better suited to protecting different aspects within your life. As well as varying in the protection they provide, the cost of each type of cover also differs. Therefore, by ensuring you secure the right type of policy for you, you can avoid paying for a more comprehensive, yet unnecessary, form of protection.

Term life insurance only protects you for a specific length of time (a term), usually between 2-40 years. If you pass away within this period of time, your loved ones will receive a pay out; if you outlive the policy, your cover will expire. This tends to be the most popular form of life insurance for single mums, as it is the cheapest and can provide protection until your children are financially independent.

Within term life insurance there are 3 different policy types.

Level term life insurance will provide your children with a lump sum pay out which holds it’s value throughout the term of the policy. Therefore, whether you pass away at the beginning or the end of the term, the pay out sum received will remain the same. This type of policy is ideal for covering an interest only mortgage, ongoing living costs, funeral costs or simply providing an inheritance to your loved ones.

Decreasing term life insurance, on the other hand, provides your loved ones with a pay out sum which decreases in value throughout the course of the policy. Therefore, the later into the policy you pass, the lesser the pay out amount. As a result, this policy type is ideal for covering a repayment mortgage or large outstanding debt in your name.

The final type of term life insurance is family income benefit. As opposed to providing your loved ones a lump sum pay out if you pass away during the protection period, your loved ones will receive ongoing, tax free, monthly payments for the remainder of the term. This makes this type of life insurance policy ideal for protecting your family against day to day living costs. Due to the reducing risk to the insurer throughout the term of the policy, decreasing term and family income benefit tend to be cheaper than level term life insurance.

As well as term life insurance, many single mums may consider whole of life insurance. This type of cover is similar to level term life insurance but provides cover for the rest of your life, guaranteeing a pay out. Whilst this seem appealing, it tends to be significantly more costly due to the guaranteed pay out, and depending on how long you live, it is possible to pay more into the policy than the overall pay out amount.

Therefore, when determining what type of cover to arrange, you should consider what it is you are looking to protect and whether or not this type of cover is feasible within your budget.

Arrange cover as soon as possible

Life insurance providers calculate premiums based of the level of risk you pose to a pay out being made. As a result, age is a huge factor within this calculation; the older you are, the more likely you are to make a claim. Therefore, it is essential to arrange cover as soon as possible to take advantage of your current age. Afterall, you will never be younger than you are now.

It can be tempting to put off arranging cover in the hope that you will be in a more financially favourable position in the future. However, by arranging cover on your existing budget, you can benefit from lower monthly premiums now and ensure that your family are protected as soon as possible.

If your current budget doesn’t allow for the full level of protection you require, it is always best to arrange cover at your current age and review increasing cover at a later date if your budget allows.

Live a healthy lifestyle

Along with age, life insurance providers take into account your health and lifestyle when determining the level of riskyou pose. Therefore, the more favourable your health and lifestyle, the more favourable the cost of your monthly premiums. As a result, it is always best to try lead a healthy lifestyle when looking to arrange life insurance. This includes being a healthy weight, not partaking in risky hobbies and quitting smoking.

Whilst a hobby can be quit immediately, insurers will class you a smoker for up to 12 months since quitting; and we all know how long it can take to lose weight. But holding off for these healthy lifestyle changes to take effect shouldn’t be cause for putting off arranging life insurance. In the interim, your children will be unprotected financially. Therefore, it is best to arrange cover with your current lifestyle, make healthy lifestyle changes and then review your policy when the healthy changes have taken effect.

Always compare quotes

Last but not least, life insurance providers differ significantly in cost and cover provided. As a result, it is essential to compare quotes from multiple providers to ensure you receive the best deal. This can also include comparing quotes between different types of life insurance policy.

There are three main ways to carry out this process.

Carrying out the research independently will allow you to compare quotes from many insurance providers but can be extremely time consuming. Whilst it will allow you to learn the ins and outs of all of the policies available, it also involves understanding a large amount of industry jargon and can become confusing.

Using a price comparison website, however, is a much faster process. Although, again this requires some understanding of the industry jargon and may only compare quotes from a shortened panel of life insurance providers.

Finally, using an FCA registered life insurance broker can allow you to compare quotes from all of the industry leading providers and will allow you to have all of the jargon explained to you to ensure that you fully understand the policy you are securing.

So, as you can see, even as a single mum it is more than feasible to arrange affordable life insurance protection to ensure your loved ones are protected if the worst were to happen to you.

Let’s make sure our little ones are protected.

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