The two most boring things you must do as a single mother.

OK stay with me, because these two things are as important as they are boring. The first is to make sure you are covered insurance wise. I am a big believer in insurance. If it’s offered, I’ve probably got it. I’m not talking about health insurance or car insurance (though I am covered in these areas as well), I’m talking about trauma insurance, child trauma insurance, life insurance, TPD insurance, and most importantly income protection insurance.

In early March this year (actually the day before my daughter’s third birthday party – PERFECT TIMING), I fell down a couple of stairs at my daughter’s daycare after dropping her off on a Friday morning. This resulted in fractures in my foot AND ankle, a grade 4 sprain (where a piece of bone detaches with the ligament), torn tendons, and torn ligaments. The doctor and physio ordered that I be off my feet as much as possible for 12 weeks. And I wasn’t allowed to drive. Once again, PERFECT; especially for a single mum.

I think I had a mini breakdown. How the hell was I supposed to keep my job, and get my daughter to daycare, swimming lessons and play dates?

I live in a two-level townhouse and my daughter’s bedtime generally involves doing laps of the stairs fulfilling various bedtime delay tactic requests, such as needing a cuddle, needing to go to the toilet, needing water, needing another cuddle, needing to go to the toilet again, de-tangling a knot in her hair, needing to go to the toilet again, or an urgent necessity to have her toenails cut. I didn’t really know how I was going to tackle all this, and it all felt tremendously overwhelming.

Once I stopped catastrophising the whole situation and tackled problems one by one, I did feel much better. The main problem to solve was: how was I going to get to work and daycare? I asked the Director of the daycare center if she’d ask her employees if any of them would be willing to pick my daughter up on their way to daycare and drop her off to me on their way home; me paying them of course. SUCCESS! I had two volunteers. Regarding work, I have to say I was extremely lucky, and my employer graciously allowed me to work from home for 12 weeks. I am also lucky that in my job as an engineering consultant, I work quite independently and can mostly liaise with my clients over the phone or email. BUT, let’s say you have a job where you are quite active. Perhaps you are a personal trainer, a traffic controller, a site supervisor on a construction site, a pharmacist, a chef, or a flight attendant; then going to work may be impossible. Or perhaps your employer would not be understanding and not allow you to work from home, and getting to work would be simply impossible. This could lead to a financial disaster and is why you need income protection insurance.

I have personally seen a few cases where single mothers have been financially saved by having income protection insurance. The thing is, there is no backup person to earn money if you are in a situation where you are unable to work. If you have a mortgage, having income protection insurance could potentially save your house. Or if you have other significant financial responsibilities, having income protection insurance could potentially save you from a downward spiral of debt.

So how does it work? Income protection insurance is an insurance policy that pays benefits to policyholders who are incapacitated and hence unable to work due to illness or accident. It is a good idea to speak to an insurance broker before you buy any old “off the rack” policy from a website (these are notorious for not paying benefits out when needed, and there has been a lot of media coverage on this in the last 12 months). In fact, I spoke to three insurance brokers before I made my final decision, as I wanted to see what they all recommended for my situation and get as many options as possible.

Many factors will influence the premium (this is the amount you pay each month or year). The main ones are:

1. The waiting period. You can usually choose this to be 30 days, 60 days, 90 days etc. The longer the waiting period, the lower the premium. The number of days means how long you have to wait to be paid out. For example, if you have an illness and need 6 weeks (42 days) off work and have a waiting period of 30 days, you will only be paid a benefit for the last 12 days. If you had a waiting period of 60 days, you would be paid no benefit. You must consider how long you would be able to afford (or be willing) to not work for.
2. Your monthly benefit amount. You can choose how much of your salary you would receive if you were paid out, generally up to 75% (some insurance companies pay up to 85%) of your salary. I recommend going the maximum on this, as even that may not be enough to cover your expenses if you were unable to work.
3. The benefit period. The benefit period is the maximum period of time that the monthly benefit will be paid out while you are disabled for the same or related sickness or injury. A lot of insurance companies only have options up to 1 or 2 years for this, but many also offer this for up to age 65. This is the ideal, but the longer the benefit period, the higher your premium will be.

Some policies will also cover you for redundancy, but this will also increase your premium.

The advantage of having a broker is that they will seek the best options for your situation, you can give them a budget to work with, and if you ever need to make a claim they will sort out all the paperwork for you to ensure you get your benefit. You can also opt to pay some out of your superannuation fund so that it doesn’t impact your budget as much. Every insurance company has a list of illnesses and injuries that are covered under their Policy, so make sure you read the fine print or ask your broker if you are unsure.

The other advantage of going through an insurance broker is that if you are going to get additional insurance, they may be able to bundle them up for you so you get a good deal.

Other insurances that you may want to consider are:

TPD insurance. TPD insurance, or total and permanent disability insurance, provides cover if you are totally and permanently disabled. When you take out this policy you have to choose between any occupation or own occupation. This is an important distinction. If you have TPD insurance through your superannuation fund it will be defined as any occupation. The difference is; let’s assume you are a taxi driver and are in a car accident and become a paraplegic, if you are covered under any occupation you may not be paid out your benefit because you can still do a job sitting at a desk, you just can’t drive your taxi. If you are covered as own occupation, then you will be paid the benefit as you can no longer do your job, which is driving a taxi.

Trauma insurance. Trauma insurance is a lump sum paid on a medically diagnosed event (such as cancer) rather than disablement like TPD insurance. It will help you pay for all the medical treatment you need, and if you have your income protection insurance as well, you will be paid that too of course.

Child trauma insurance. This is the same as trauma insurance but for your child. It will help ease the financial stress as you will be able to take leave from work to be there for your child and pay for medical treatment if they get severely ill. This is generally quite cheap if connected to your own trauma insurance policy, and you can usually add it on for around $5 a month, depending on the benefit amount that you choose. Generally, most insurance policies will allow you to insure your child for trauma from age 2.
Life insurance. Life insurance is paid out to your beneficiary after you die. This is a good idea if, for example, you want to leave your house to your child and need to pay it off after you die, or if you want to leave money behind for your child for education or other costs involved in upbringing if you are not around.

Again, I strongly encourage you to speak to a broker about it all, as they will help you choose what you need, and what benefits you can have depending on your budget.

OK, on to the second most boring thing you must do as a single mother. Writing up a will. Writing up a will is important so that it is clear on who will be the guardian of your child in the event that you die, and what you are leaving to whom. If you are a single mother by choice (i.e. have found a sperm donor and undertaken IVF) this is particularly important, as there may be no father on the scene. If there is a father on the scene, they will usually automatically be the guardian of your child (best to speak to a wills and estate lawyer about this though) however you should certainly add a guardian to your will in case your child’s father dies suddenly, or is not able/willing to raise your child.

You will need to appoint an executor in your will. NSW Trustee and Guardian define what an executor is. The role of the executor is to:

locate the will;
apply to the Supreme Court for a grant of Probate of the last Will (Probate is a formal document that confirms the executor and gives them permission to administer the estate);
determine the beneficiaries;
collect assets;
make sure all claims and debts are received, assessed and paid if substantiated;
distribute assets according to the terms of the Will, including managing longer-term trusts;
prepare and manage accounts;
prepare and lodge taxation returns; and
defend litigation.

When choosing an executor it is a good idea to choose someone who:

you trust completely, and have known for a long time;
you know for sure would be looking out for what is in your child’s best interest;
is good with numbers, planning, maths etc.;
is highly organised;
you know will fight for what is in your child’s best interest if need be (for example if your ex tries to take your money);
has the assertiveness to stand up to your ex if required and be firm;
knows your history with your ex; and
is young and therefore highly likely they will still be alive when your child is an adult (particularly if the executor is also managing the trust and will allocate money to your child throughout growing up and as an adult).

Alternatively, you can ask anyone you choose, or even appoint your relevant state department (for example in NSW, the NSW Trustee and Guardian). You can set up a free meeting with them to discuss how it works, and ask them any questions you may have.

If you are going to have a trust for your child, you also need to choose someone to manage it. It is a good idea if you appoint your executor as the manager of the trust. If you have life insurance, ensure the beneficiary is your estate. This is so that your life insurance money goes into the trust and is not left to your child, which your ex (as guardian) will then be in charge of. The manager of the trust can then distribute the money to your child or ex through various life stages or ages, or however you choose.

When engaging a wills and estate lawyer, make sure you shop around. I collected quotes from about 15 individuals and firms when I did my will. Some were recommended, some I found myself. The prices ranged between $250 – $6,000. You DO NOT need to spend $6,000. I got a perfectly good will done for under $300.

I could go on about insurance and wills for the rest of the day, but I will leave you with that so you don’t fall asleep (if you haven’t already) but put these things on your “to-do” list and find a great insurance broker and wills and estate lawyer, and get started as soon as you can.

P.S. DID YOU KNOW?

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