Are you a single parent who’s been wondering which option is better for you: term or whole life insurance?
You’re not alone.
As a single parent, you may be aware that your financial security depends on having the right amount—and the right type—of life insurance to meet the unique needs of your family.
What you might not know is how to research your options. So, let’s help you with your research and answer your question:
Which is better: term or whole life Insurance?
The Difference Between Whole Life and Term Life Insurance
While the best life insurance for parents may differ from family to family, knowing the difference between term and whole life insurance is the first step in selecting the type of coverage that makes the most sense for you.
|Whole life||Term life|
|Intended Duration||Lifetime||5, 10, 15, 20, 30, or 35 years*|
|Loans against policy?||Yes||No|
|Choice of policy length?||No||Yes|
|Death benefit amount guaranteed?||Yes (may increase)||Yes (if policy owner dies during term)|
|May pay dividends?||Yes||No|
*Some life insurance companies (AIG, for example) offer flexible term lengths. To learn more, explore our ratings and reviews for life insurance companies.
Why You Might Consider Term Life Insurance
Term life insurance is often the most affordable option and is recommended by many fee-only financial planners to their clients for this reason.
Here are the average annual term life insurance costs for men and women according to age.
If your age is not listed in our tables below, check your price with our quoting tool. It’s a free service and you don’t have to share your contact info to get a quote based on your age.
Average Annual Term Life Insurance Premiums for Men (USA)
Age at Purchase Policy Amount 20-Year Term Life 30-Year Term Life 30 $250,000 $156 $240 $500,000 $242 $403 $1,000,000 $415 $720 40 $250,000 $210 $384 $500,000 $348 $687 $1,000,000 $631 $1,281 50 $250,000 $491 $913 $500,000 $898 $1,725 $1,000,000 $1,477 $3,301
|Age at Purchase||Policy Amount||20-Year Term Life||30-Year Term Life|
Average Annual Term Life Insurance Costs for Women (USA)
|Age at Purchase||Policy Amount||20-Year Term Life||30-Year Term Life|
» Compare: Term life insurance quotes
The Ladder Strategy
Term life policies allow you to buy coverage for a specific time period (a term) according to your anticipated needs, so you will not be paying for life insurance longer than you need it. For example, you may wish to:
Purchase a 10-year term life policy to protect your teens through college (and a few years beyond), until they’re able to support themselves. You might also buy a 20-year policy to cover the length of your mortgage loan, so that your kids would not have to move if you would die.
This strategy is called laddering, or purchasing multiple policies of different terms, to provide coverage that matches your needs at various times in your family’s life.
Many term life policies come with rider options. Some are included at no charge; others you need to purchase as an add-on to your term life policy. Many riders provide extra protection for your family in case you would become injured or disabled, could not work, or would require hospice care.
Riders with accelerated death benefit options provide income (subtracted from your death benefit) to your loved ones to replace your lost income and to pay for expenses associated with caring for you.
If you know that you need term conversion, be sure to use our life insurance company ratings. Our reviews offer a comprehensive look at each carrier that we sell, including rider and term conversion options, along with our underwriters’ views on each carrier’s strengths.
While the best life insurance for parents may differ from family to family, knowing the difference between term and whole life insurance is the first step in selecting the type of coverage that makes sense for you.
Why You Might Consider a Whole Life Insurance Policy
Just like the name says, a whole life policy covers you for your entire life—meaning that your family is guaranteed a pay out of money upon your death.
That’s the upside.
The downside of permanent life insurance is that it can cost ten times (and more) than term life insurance. So, while it’s a great option for some; for most families it is unaffordable.
As with term life, if you buy your permanent life insurance policy when you are younger, your premiums will be lower.
Other upsides of this type of policy is that it can increase in value over time and may pay dividends—part of the profit that the insurance company earns on the premiums paid is in turn paid back to the insured. You may also get a loan based on the value of your permanent policy or withdraw accrued cash.
Whole life is a much more expensive type of life insurance for parents. But, it may be useful to buy a type of policy that will cover your final expenses (including burial or cremation; or other end-of-life expenses, such as medical bills).
You can also save for these end-of-life expenses. But, as many people don’t have enough savings, they buy life insurance to cover the gap years until they do have enough savings.
Take a look at your own needs and savings habits.
Contact Quotacy if you decide you wish to pursue a whole life insurance plan. Due to the complexity of the products available on the market through our carriers, we cannot offer you a quote online. But, we have a wonderful advisor, Glenn Terrell, who has helped our clients buy a combination of term and whole life policies suitable to their financial and estate planning needs.
Best Life Insurance for Single Parents
As you can see, the answer to:
Which life insurance is better: term or whole life insurance?
…depends on your financial circumstances and your goals for buying life insurance.
For most single parents (and anyone else), the best life insurance option will be to buy a policy that covers the amount you need when you need it.
If you only need coverage for a certain period of time, go for an affordable term life insurance policy until your kids are self-supporting or your mortgage is paid off, for example.
If you need something that will cover your family no matter when you die, a permanent life insurance policy is best, if you can afford the premium and it adds benefit to your estate or financial plan over what other investment vehicles can do.
How to Calculate Your Insurance Needs as a Single Parent
Here are a few suggestions for calculating the amount of life insurance you need as a single parent.
If you’re the non-custodial parent:
In most cases, the non-custodial parent provides monthly child support and/or alimony to the custodial parent.
If this is your situation, you will, at minimum, need enough life insurance to cover the loss of your monthly support payments until your child support obligation ends (this differs by state), alimony, ongoing shared expenses (your children’s health insurance), and planned contributions to your children’s college fund or savings.
» Calculate: Life insurance needs calculator
If you’re the custodial parent:
You may need more life insurance than someone in a two-parent household, even if you receive child support. Here are some considerations and tips:
- If you are planning to pay for or contribute to your children’s college tuition fees, choose a term that lasts until your youngest child will have graduated. This allows you to have the peace of mind that one of life’s major expenses will be a little less burdensome for your children.
- Your children will need to receive approximately 80% of your current income to continue to live comfortably after you’ve passed on, whether they go to live with a parent, family member, or a legal guardian.
- Tally the approximate costs of your mortgage or other outstanding debts, along with ongoing household expenses.
- Your burial and funeral expenses, as well as a legal fees should be taken into account.
- You’ll also have to think of any extra expenses your former partner (or your children’s guardian) may incur as they take over your household responsibilities. These may include child care costs.
- If your children would have to move homes in order to live with their other parent (or guardian), factor in moving costs and other associated expenses.
Take a look at this example:
Patricia is a single mom of a nine-year-old and a twelve-year-old. She makes about $80,000 per year. If she passed away, her parents would become her children’s guardians. They’d need to move from their retirement village to a larger apartment. She has about $25,000 in debt, in addition to her mortgage, and she wants to add to her children’s college funds with the proceeds of the death benefit.
Here’s where she stands:
- Income Replacement: $480,000
- Additional Housing Costs: $50,000
- Debt: $25,000
- End of Life Expenses: $10,000
- College Funds: $200,000
Total amount of coverage needed: $765,000
If Patricia is 35 and a healthy non-smoker, she may pay as little as $26 per month for a 20-year term life policy with $800,000 in coverage.
Use our free life insurance needs calculator to estimate how much coverage you need and see just how low your premiums could be as a single parent.
About the writer
Director of Inbound Marketing
Kate is Director of Inbound Marketing at Quotacy, where she is happy helping one million people protect their loved ones with the gift of life insurance. Her writing has had audiences in the art, academic, and advertising worlds. She lives in Minneapolis, where she enjoys meditating, making snow angels, and supporting the vibrant arts community. Connect with her on LinkedIn.