Guide to Life Insurance for Single Parents

Do single parents need life insurance?

Single parents need life insurance to ensure that their dependents are financially secure if they pass away. The policy would pay a tax-free, lump-sum death benefit, which can help cover your kids’ living expenses, child care, and educational costs.

Term life insurance is an affordable and flexible option for life insurance for parents. 

“Single parents actually have a bigger need for life insurance as they are most often the main and only providers for their families.” —Ivana Govedarica, Certified Life Insurance Advisor

The best life insurance for single parents

The best type of life insurance for single parents in Canada is term coverage because it’s affordable and flexible enough to fit your unique needs.

Terms typically range from 10 to 30 years, and the policy will pay out if you pass away during the term. You’ll want to choose a term that aligns with your financial obligations—that is, until your kids are financially independent and any significant debt is paid. 

Your coverage amount should be enough to replace your income, pay off your debts, and cover your kids’ essentials, including childcare and future education.

Did you know?

Most kids don’t need life insurance policies, but PolicyMe offers $10,000 in complimentary coverage per child with all adult term policies. This means that if your child passes away, you’ll receive a payout to help cover their final expenses.

Life insurance add-ons for single parents

You can add other coverage to a base term life insurance policy to provide additional peace of mind:

• Critical illness rider: Pays a lump sum once if you’re diagnosed with a serious health condition, like cancer or heart disease. You can also buy critical illness insurance as a standalone policy. There may be medical questions as part of the underwriting and application process.
• Disability insurance rider: Pays a regular income if you’re unable to work due to injury or long-term illness.

These add-ons are optional and not necessary for everyone, so be sure to assess your needs so you’re not paying for coverage you don’t require.

Remember, there are exclusions

Life insurance will not pay out if you pass away by suicide within two years of purchasing the policy. Your loved ones may also not receive the death benefit if you pass away due to high-risk hobbies or occupations that you didn’t disclose during the application process.

How much does life insurance for single parents cost?

The average cost of life insurance for a 30-year-old single parent in Canada is between $20 and $40 per month.

Your price depends on your age, health, and the term/coverage combination you select. The older you are and the longer your term length, the more you can expect to pay for your premium. Men pay more than women, and smokers’ rates can be 2–3x higher than nonsmokers for the same coverage.

Here are some sample rates for term life insurance with PolicyMe for a 20-year term with $500,000 in coverage:

* These premiums are for nonsmokers.

Here are rates for a 30-year term for $500,000 in coverage:

* These premiums are for nonsmokers.

How to calculate your life insurance needs

The first step in determining your life insurance needs is choosing your coverage amount. How much life insurance you need depends on your future expenses:

• Annual income to be replaced
• Debt to pay off (mortgage)
• Other expenses (child care, education costs)

Use a life insurance calculator to simplify the estimation, and then round to get an approximate coverage requirement. For example, if your obligations total around $285,000, your kids might benefit from $300,000 in coverage. 

Remember

You don’t want to underestimate your insurance needs, but you don’t want to substantially overestimate them, either. We recommend paying for the coverage you need—no more, no less.

Next, you’ll need to choose your term length. Your coverage should last as long as your kids will be dependent on you, which may be anywhere from 15 to 30 years, depending on their ages.

When your term policy expires, you may have the option to renew it—but premiums will increase due to your age, so it’s smarter to get the coverage duration you need now to secure the best rate. 

“To keep premiums low and still get meaningful protection, buy the amount of coverage your family would truly need for things like the mortgage, education, and living costs. Apply early while you’re young and healthy, since that’s when rates are lowest and you can lock them in for your full term.” —Jeremy Burbano, Life Insurance Advisor

Choosing a beneficiary for your life insurance

Your kids are probably the intended beneficiaries of your life insurance policy, but most life insurance policies will not pay out claims to kids under 18.

As part of your estate planning, be sure to name an adult trustee to ensure that your kids receive the death benefit. If you don’t make arrangements before you pass, the court may appoint a legal trustee to oversee the payment for you.

6 things to remember about single parent life insurance

Here are six things single parents in Canada need to understand before purchasing life insurance.

1. If you’re divorced, be sure to update your policy or get your own.

If you didn’t have your own life insurance policy before, it’s time to get one. If you did, you may need to change the beneficiary if you previously named your ex-spouse. Ask your ex-spouse to ensure you’re the beneficiary on their policy if you’re the primary caregiver and financially dependent on them.

2. Permanent life insurance typically isn’t ideal for single parents. 

Premiums are 5–15x higher for permanent life insurance than term, and the coverage lasts a lifetime—which is usually only necessary if you have dependents who require lifelong support. While these policies accumulate cash value, investing your money into a TFSA or RESP might be a better option to grow your wealth and ensure your kids’ financial future.

3. You probably don’t need life insurance for your kids.

Most single parents don’t require life insurance policies for their kids. You’re unlikely to make a claim against the policy, and you’ll be locked into a monthly premium for a long period. Your own term policy with PolicyMe includes $10,000 in free coverage per child. To offer greater financial security for your child or children, consider putting money into a savings account rather than towards their life insurance premium.

4. Mortgage life insurance isn’t a good strategy to protect your kids.

Mortgage insurance pays off your mortgage balance if you pass away, but it’s more expensive than a term insurance plan and will benefit the creditor, not your kids. Instead, ensure your term life policy coverage is sufficient to cover your mortgage balance and pay for your kids’ current and future needs.

5. Your group life insurance probably isn’t sufficient.

While group life insurance is helpful and inexpensive, it’s typically around 1–2x your annual salary—not enough coverage for the average Canadian family. Plus, it won’t cover you if you switch jobs or get laid off. Instead, use your group life insurance as a starting point and secure a term policy that supplements the coverage.

FAQ: single parents life insurance