Life insurance often isn’t needed for a single person with no children. Some may say, “Buy it while you’re young and healthy.” The reality is that, if you don’t need coverage, the money toward a life insurance premium could be better utilized by contributing to retirement savings or building an emergency fund. But, all single people aren’t off the hook. There are still quite a few circumstances when you may want to consider purchasing a policy.
The purpose of life insurance is to help financially protect the people you love if you were no longer around. The question everyone needs to ask themselves when considering buying a policy is if someone would be impacted by their death financially. If the answer is yes, then life insurance might be the right call. If the answer is no, then you’re free and clear, and use the money to pad your emergency fund instead. See you in a few years.
While life insurance policyholders are usually individuals who have a partner and kids, there are still many scenarios where a single person with no children might need coverage. And by many, we really mean seven. Take a look.
Seven scenarios where a single person might need life insurance
#1 You have student loans
Debts are expensive. Debts are annoying. Debts are… very common. The average college student graduates with more than $30,000 in debt. Depending on where you went to college and how many degrees you earned, your student loan debt may even approach six figures. Is your cosigner on the hook to pay off those loans if something happened to you?
The good news: federally funded student loans are often discharged if the borrower dies, which is the type of loan many undergraduate students have. And, in some cases, private loans may be forgiven, also. However, you should never leave this up to chance.
First, find out what happens to your student loan debt if you die. If it’s discharged, then buying a term life insurance policy to protect your cosigner might not be necessary.
If you uncover that your parents or someone else would be on the hook for the loan payments, then it’s time to consider a term life insurance policy. A term life insurance policy offers an affordable solution to help protect the kind person who cosigned on your loans financially. For example, a healthy 30-year-old woman can buy a 20-year, $100,000 policy starting at $8.42 per month.
When buying a term life insurance policy to protect against your student loans, choose an amount that covers the balance and a term length that at least lasts until the target pay off date of your debt.
#2 You have a mortgage
If you’re a single homeowner with a mortgage, you should consider protecting against the balance term life insurance coverage. If you died, the policy could be used to pay off the mortgage, and you could leave the property to a loved one or a charity. If your mortgage has a cosigner, the policy could be used to protect them as well. With this approach, the money you have invested into your mortgage will still benefit someone after you’re gone. It’s an ongoing act of generosity and love. (You should also create a living will to make sure your wishes come to fruition.)
To use a term life policy to protect your mortgage, choose a policy length that lasts until the loan is projected to be paid off and that covers, at least, the full value. For most people, mortgages are a 30-year commitment, so a 30-year term is often the right choice.
#3 You have cosigned debts
Most people have some kind of car loan or credit debt. If you have a cosigner or a partner listed on these debts, then they’d likely be stuck with the bill after you’re gone.
For many single people, your auto loan and credit card didn’t require a cosigner if you had enough credit to qualify for the loan on your own. However, if you do have a cosigner, and don’t have enough money in savings to cover the deb, consider life insurance to protect your friend or loved one.
#4 You have financial dependents who aren’t biological children
Many Americans help financially support aging parents, grandparents or even children in their family who aren’t biologically theirs. If you have any family members who rely on you financially, then you should consider life insurance. Your coverage could help pay for health care and living expenses if you were no longer around.
Deciding what the right amount of coverage is in these situations can be a bit more complicated. And, most life insurance calculators don’t offer options for aging family members in particular. For kids in your family, it’s simple. Input information in the online life insurance calculator as if the child is your own.
For elderly relatives, here’s a helpful hack: put in their information as if they are your partner and list them as not working. If they have debts, include those. This would give you an idea of how much of a nest egg they need to be financially stable if you were no longer around to assist.
Having a living will with directives is also imperative in this case.
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#5 You have business partner
If you’ve started a business with a partner, your untimely death could be financially devastating. Not only would they be without your skills and vision, but your death could also wreak havoc on the financial structure of your business.
Term life coverage could smooth things out and buy your partner some time to make decisions that are best for the future of your business. With that in mind, you should also create a plan for the company if each of you were no longer around. Find out how much money would be needed to overcome the challenges that a partner’s death would create.
If your business is cash poor or in debt, which is common for many startups, term life coverage could offer an affordable way to fund your contingency plan. Be sure your plan at least considers business debts, especially if you have personal property as collateral. For details, consult an attorney who is familiar with the business partnership rules in your state.
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#6 You want to cover end-of-life expenses
Funeral expenses cost $7,000 to $10,000 on average. Compared to mortgages, business needs, and student debt, this isn’t that much. Still, many people like to know these expenses are taken care of so that their mourning friends and family won’t need to contribute financially to pay off these charges. Often, life insurance through your employer is enough to cover final expenses, like a burial or funeral insurance policy, and they are usually one or two times your annual salary.
But, there are other end-of-life expenses to account for. It’s no fun to think about, especially when you’re young and healthy, but a terminal illness that requires hospice care or results in intensive care at a hospital could be costly – sometimes up to $10,000 a day.
In these scenarios, an individual term life insurance policy outside of work can provide adequate coverage and, ultimately, peace of mind. A policy in these situations enables your survivors to remember you and mourn your death instead of worrying about financial concerns.
#7 You want to leave a legacy
Most people want to make an impact on the world, whether it’s through our families, in our day-to-day interactions with others, or something that will help those less fortunate even after we’re gone. The proceeds of a term life insurance policy can help serve as a financial legacy to whoever or whatever it’s purchased to protect.
For example, if you’ve ever thought about setting up a scholarship fund or making a sizable contribution to a personally-meaningful charity, you’ll need to plan ahead. Term life insurance can serve as a backup to this planning should the unexpected occur.
Be sure to make your arrangements known to your beneficiary and estate planner. Then, once you save enough money to leave your legacy, you can let your life insurance policy expire or give your beneficiary new directions to follow if you died while the policy was in force.
Single or not, chances are that you may identify with at least one of the situations above that. And if you’re still unsure about your need for coverage, an online life insurance calculator can provide a free assessment of your needs. (And, yes, it will even tell you if you don’t need a policy at all.)
Life has a way of changing. Fast. If you’re currently single, financially secure and free of debt, term life insurance probably doesn’t need to be on your radar right now. By understanding the scenarios that would necessitate coverage, you’ll be better prepared for whatever comes next. It’s a great feeling.