Which One of Your Clients Urgently Needs Life Insurance? A Single Parent with Dependent Children
An in-depth conversation with Cannon EVP and Practice Management Expert, Linda Eaton.
You can’t place a value on the nurturing and love parents give their children. But if you are a single parent, you can and should and must place a value on all the tasks you perform. If you have a client, who is a single parent you are doing that client a disservice if you don’t bring up life insurance to him or her.
According to the U.S. Census Bureau, there are approximately 13.6 million single parents in the U.S.1 There are few issues more emotionally devastating to a child than losing their only parent. The only thing that could compound this emotional catastrophe is the loss of that parent’s income and a general lack of money.
Perhaps a child is going to a private school, and most of his friends are from that school. Being compelled to drop out because there isn’t money to pay the fees, will add to this emotional catastrophe. While family members or family friends can and do step in as surrogate parents or are named as such in the will of the deceased parent, they may lack the financial resources to support the additional child or children.
As any parent knows, the cost of raising a child is significant. According to the U.S. Department of Agriculture’s 2015 annual report, Expenditures on Children by Families, raising a child from birth to age seventeen will cost approximately $233,000.2 This doesn’t include college or post-high school vocational training or community college.
If you are a single parent who wants your children to attend college without incurring huge student loans, and you pass away without enough life insurance, they will incur substantial debt. How much? “The average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year.”3 It is important to note this figure is the average. Children who take out student loans to attend elite universities will graduate with a much higher debt load.
While it is hard to get away from advertisements touting life insurance, plenty of Americans don’t carry any. According to a 2011 report by the Life Insurance Marketing and Research Association (LIMRA), only sixty-one percent of men and fifty-seven percent of women have some type of life insurance coverage.
According to Cannon EVP and Subject Matter Expert, Linda Eaton, “the single most urgent issue which should concern every advisor, and push you to ask questions of your clients, is this: approximately seventy percent of single parents don’t have any life insurance. This is a staggering figure, and you are in a position to do something about it. Clients put off buying life insurance as if such actions will advance their date of death. It’s human nature. But you will certainly get their attention if you walk them through the consequences to their children of not having life insurance.”4
Linda believes that as an industry we have focused so much on retirement that we have let certain basics such as life insurance and disability insurance fall by the wayside. “With single parents, it is absolutely critical that you inquire about life insurance,” Linda said.
The second most important issue to inquire about is the amount of disability insurance your clients carry. Nothing is more misunderstood or ignored then disability insurance. Linda said, “Your clients who are not retired have a greater risk of becoming disabled than dying. Because clients have heard about Social Security disability insurance, they presume this will provide for them and their families if they are disabled. But this is not the case.”
The average monthly benefit paid to a disabled worker by Social Security disability is $1,197 per month. Each child of a disabled worker receives an average benefit of $367.00 per month. This is hardly enough money to maintain the lifestyle of a high earning professional.5
“Let’s face it,” Linda said, “life insurance and disability insurance are not the most glamorous financial topics to discuss. But you will fail in your duty to care if you do not ask single parents about their insurance coverage. The advisor who builds an investment portfolio or retirement plan for a single parent without protecting those assets with life insurance is building a mansion with no foundation. It will be swept away by the first flood.”
To learn more about this topic, register for our Capitalizing on the Insurance Opportunity course in Chicago, August 20 - 21, 2018.
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Resources:
1 https://tinyurl.com/US-Census-Single-Parents
2 https://www.cnpp.usda.gov/ExpendituresonChildrenbyFamilies
3 https://studentloanhero.com/student-loan-debt-statistics/
4 https://smartasset.com/
5 https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/
Contributing writer: subject matter expert Charles McCain