Guest post, Elizabeth Renter, NerdWallet
Auto and health insurance are essential for most people, and there’s a good chance you have those basics covered. However, once you become a parent, insurance, like so many other things, takes on new dimensions and significance.
Maybe you didn’t buy disability, renters, life and long-term care insurance when you were single with no dependents, out of cost concerns or simply because you didn’t think you’d need it. However, when you have children, you owe it to them to carefully consider the situation they’d be in if something happened to you and you weren’t covered. This is especially true if you’re raising a child alone.
“In single-parent households, the children are often wholly dependent on your income, and in many cases, the other parent isn’t involved at all,” says Emma Johnson, finance blogger at WealthySingleMommy.com. “If something happens and that income is gone, the kids will inevitably suffer.”
No matter your family size or income streams in the household, weigh the potential consequences of going without coverage when deciding whether you need additional insurance.
1. Life insurance
Forty percent of Americans don’t have life insurance at all, and 25% don’t believe they have enough, according to Life Happens, an industry nonprofit. If you don’t have it, get it. If you do, make sure the policy size is sufficient.
The case for life insurance is pretty simple: It provides for your family in the event of your death. This could mean replacement income, funeral costs, and paying off your mortgage or even your child’s college education.
Term life insurance is the best solution for most families. The general rule of thumb is to purchase a policy long enough to cover your major financial obligations. For example, if you have 20 years left on a 30-year mortgage, buy a policy with at least a 20-year term.
2. Disability insurance
One in five Americans has a disability and more than one in four 20-year-old workers will become disabled before reaching retirement, according to the Social Security Administration. You could receive a monthly disability check from the government, but the SSA reports those averaged just $1,165 per month at the beginning of 2015.
Disability insurance pays you a portion of your salary while you are unable to work. This allows you to recover from your injury or illness without the added stress of lost income.
There’s a chance your employer already provides disability coverage, on its dime. If not, you may have access to low group rates through your job. You can also purchase an individual disability policy on your own, allowing you to choose the insurer and specific benefits no matter where you work.
3. Renters insurance
If you’re a renter and there’s a fire or tornado, you could lose all your belongings.
Ninety-five percent of homeowners have homeowners insurance, but only 40% of renters have renters insurance, according to the Insurance Information Institute, an industry group.
A renters insurance policy will pay out when your personal property is damaged or destroyed by events such as a fire, burst pipes, electrical surges, vandalism, theft and more. It will also cover your living expenses if your residence is uninhabitable due to damage covered by your policy. Best of all, it’s inexpensive. The average annual premium was $188 in 2013, according to the institute, or less than $16 per month.
4. Long-term care insurance
Long-term care insurance can cover the costs of in-home nursing care, adult day centers, nursing homes and assisted living facilities, and that’s no small amount. In 2016, the median annual cost of a semi-private room in a nursing home was $82,125, according to a Genworth survey. These services are generally not covered by Medicare, and 70% of people turning 65 will eventually need some form of long-term care, according to the U.S. Administration on Aging.
The main drawback of long-term care insurance is cost. How much you pay will depend on your age, health and policy specifics.
Married people might count on their spouses or children to care for them in old age, but there are no guarantees they’ll be able to, and single parents certainly have cause to weigh the cost vs. benefits of this coverage.
“I don’t want to make parents feel guilty, because long-term care insurance can be expensive,” Johnson says. “However, if you have the means, it’s definitely something you should look into.”
Elizabeth Renter is a staff writer at NerdWallet, a personal finance website. Email: email@example.com. Twitter: @ElizabethRenter.