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. A life insurance policy payout can be a safety net that helps your survivors shoulder the financial burden of your death. The payout itself (called a death benefit) is the amount of money the life insurance company would pay your beneficiaries if you died . Your beneficiaries can use the policy’s death benefit for a number of financial needs – to help cover funeral expenses, meet day-to-day living expenses or plan for the future, to name a few.
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 might want to 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 mean here are the seven most common 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: 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 cosigned on the hook for those loans. 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 25-year-old woman in excellent health can buy a 10-year, $100,000 Haven Term policy, issued by MassMutual, starting at $7.97 per month.
Term life insurance policies offer coverage for a specified duration – the term length – typically for 10, 15, 20 or 30 years. If you have student loans, consider buying a term life insurance 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 debt.
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. If you died during the coverage term of your policy, the death benefit would be paid to your beneficiary, who could use it to help pay the mortgage. If your mortgage has a cosigner who is also your beneficiary, they could use the death benefit to help pay the mortgage note.. 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.)
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 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 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 financially, 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 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.
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5. You have business partners.
If you’ve started a business with a partner, your untimely death could financially step back your enterprise. Not only would they be without your skills and vision, but your death could also hurton 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 common 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 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 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.
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 once the coverage term has ended, 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 might not 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.
It’s not just easier life insurance, it’s an easier life.
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