7 scenarios where a single person might need life insurance
Life insurance isn't always necessary for a single person, but there are some circumstances where you may want to consider a policy.
You’re probably familiar with the idea that life insurance is a way to protect your family in the case of your untimely death. If you have a partner or children that rely on your income, for example, taking out a life insurance policy can protect them financially when the worst-case scenario happens.
Do single people need life insurance if they don’t have children? Not necessarily.
There are a few common scenarios in which life insurance might be a good fit. Two CERTIFIED FINANCIAL PLANNER™ professionals and a money coach explain how single people — and their loved ones — can benefit from a life insurance policy.
In this article:
1. You have student loans
The average American with student loan debt owes $38,792, according to the most recent research. 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?
You might want to think about taking out a life insurance policy if your parents (or other loved ones) paid for the costs of your college education too. “Medical students whose parents are covering the cost of tuition, perhaps with the expectation of being repaid or supported later in life, should consider a life insurance policy,” says Brendan Willmann, a CFP® professional at Granada Wealth Management.
The good news: Federal student loans are often discharged if the borrower dies, which is the type of loan many undergraduate students have. But be aware that if you have private student loans, those debts might not be forgiven in the event of your death and could leave your cosigners on the hook for those loans. However, you should never leave this up to chance. Find out what happens to your student loan debt if you die.
If you find that your parents or someone else would be responsible for the loan payments, then it’s time to consider a term life insurance policy. It offers financial protection for the kind person who cosigned on your loans financially.
Term life insurance policies offer coverage for a specific duration – the term length – typically for 10, 15, 20, 25 or 30 years. If you have student loans, consider buying a term life policy in a coverage amount that would be enough to pay the balance of the loan, and a term length that at least lasts until the target pay off date of your outstanding debt. For example, a 25-year-old woman in excellent health can buy a 10-year, $250,000 Haven Term policy, starting at $8.60 per month.
2. You have a mortgage
If you’re a single homeowner with a mortgage, you should consider purchasing enough coverage for a sufficient term length taking into consideration how much you owe on your mortgage and how many years to its payoff.
This is one of the reasons why Emma Leigh Geiser, a personal finance coach, bought coverage while she was still single. “I purchased my first term life policy when I was single in my early twenties and bought my first home. My sister and I actually bought and lived in the property together.”
At that time, Geiser and her sister were both ER nurses — so they knew how quickly life could change for the worse. “We knew that if one of us unexpectedly died, the other would struggle to pay the mortgage and would be too emotionally wrecked to deal with everything,” she says. “We both took out policies, listed each other as beneficiaries, and had enough coverage to pay off the mortgage and provide a little extra for time off or investing.”
If you died during the coverage term of your policy, the death benefit would be paid to your beneficiary, who could use it toward the mortgage payment. If your mortgage has a cosigner who is also your beneficiary, they could use the death benefit to help pay the mortgage balance. With this approach, the money you have invested into your mortgage could 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.)
So if you have a mortgage and want to provide your loved ones with resources to help pay it in the event of your death, choose a policy length that lasts until the loan is projected to be paid off and that covers, at least, the full value. For many people, mortgages are a 30-year commitment, so a 30-year term can be a reasonable choice.
3. You have co-signed 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.
Betty Wang, a CERTIFIED FINANCIAL PLANNER™ professional and founder of BW Financial Planning, doesn’t generally recommend that single people with no dependents get life insurance — unless those people are in debt.
“When the single person has a mortgage, car loan or credit card debt, I ask the client to think about people who will have to deal with his estate,” Wang told me. “Do you want them to deal with the mess of debt collectors after you die? If these are issues, the client should consider purchasing a life insurance policy.”
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 debt, 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 for financial support, then you may want to consider life insurance. If you’ve named them as your beneficiaries, the policy payout could help them pay for things like health care and daily 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 might need to be financially protected if you were no longer around to assist.
Having a living will with directives is also imperative in this case, so you’ll want to speak with an attorney.
5. You have business partners
If you plan to start a small business and grow your company through small business loans, for example, you’re probably going to need life insurance first. “Insurance will likely be required for securing a business loan,” Willman explains. You’ll also need to list your lender as one of the beneficiaries on your life insurance policy, to help ensure your loan will be paid off even in the case of your death.
If you’ve started a business with a partner, your untimely death could financially set back your enterprise. Not only would they be without your skills and vision, but your death could also hurt the financial structure of your business.
Life insurance 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 typical for many startups, term life insurance coverage could offer an affordable way to provide funds to your business in the event of your death, and could be a key part of your business contingency plans. Be sure you take into consideration 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.
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 such funeral costs 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 usually offer coverage options of 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 affordable, additional coverage and, ultimately, peace of mind. A policy in these situations can help 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 life insurance policy can help serve as a financial legacy to those you leave behind.
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. Life insurance can serve as a backup to this planning should the unexpected occur.
Whether life insurance is worth it depends on your situation
Single or not, chances are that you may identify with at least one of the situations above. 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 might not need a policy at all.)
Life has a way of changing. Fast. If you’re currently single, financially secure and debt-free, a life insurance plan 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.
About Nicole Dieker
Nicole Dieker has been a full-time freelance writer since 2012, with a focus on personal finance and habit formation. In addition to Haven Life, her work regularly appears at Lifehacker, Bankrate, CreditCards.com, and Vox. Dieker spent five years as a writer and editor for The Billfold, a personal finance blog where people had honest conversations about money, and is the author of Frugal and the Beast: And Other Financial Fairy Tales.Read more by Nicole Dieker
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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
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