Life insurance becomes necessary when your thinking goes from “me” to “we.” That can be when you get married and have a spouse who relies on your income, you have children, or even if you have cosigned debts that might be left to someone to pay off. For most people, you will fall into one or all of these scenarios at some point in your life.
Because coverage recommendations are personalized to address your individual coverage needs, answering “who needs life insurance” and “how much” can vary based on your financial situation, age and how many financial dependents you have.
Deciding If You Need Life Insurance: By Family Structure
The simplest way to understand if you need life insurance is to take a look at your current family structure and responsibilities. While coverage needs aren’t one size fits all, it can give you a solid understanding of which life situations require a policy.
You’re a Parent
According to a Gallup poll, 90% of Americans have kids or plan to have them. If you’re part of this very large crowd and have children and a partner who rely on your income to pay the bills, then you most likely need life insurance.
A life insurance policy when you have kids can help your spouse cover day-to-day living expenses, pay off significant debts, cover childcare and send the kids to college. In the worst case scenario, the proceeds of a life insurance policy help make sure your children are financially cared for if both parents were no longer around.
To make sure you have the right amount of coverage, it’s best to use an online life insurance calculator to help you out.
You’re Newlyweds or Married Without Kids
Not having children doesn’t mean you’re off the hook for life insurance. With marriage comes dual financial responsibilities that are left to both spouses to cover. Could your partner cover the mortgage or rent, pay off cosigned debts or cover a funeral and final expenses on their own? If the answer is no to any or all of those scenarios, then purchasing a life insurance policy might be the right thing to do.
Fortunately, coverage is more affordable the younger and healthier you are, so if you’re a young and healthy newlywed with no plans to have children, you can probably snag a 30-year, $250,000 policy for less than a few lattes a month. The peace of mind that comes with knowing you’ll both be taken care of is worth it.
If you’re single with no kids or free of cosigned debts, then you’re off the hook. You probably don’t need life insurance coverage. For now.
However, if you’re one of the millions of young Americans with cosigned debts like student loans or even credit cards, then you might want to consider what would happen to those debts if you died. Privately funded student loans, for example, aren’t always forgiven in the event of death, which is why it’s important to understand if your cosigner would be left to pay off your debts.
If you think a cosigner (most likely a family member) would be responsible for paying off debts, then you might want to consider a small life insurance policy to cover you until you’re expected to be debt free. Small amounts of coverage, especially when you’re young and healthy, are very affordable. For example, a 15-year, $100,000 policy would cost a healthy 25-year-old woman less than $10 per month.
Life insurance can’t reduce the grief, but it can prevent your loved ones from being in a difficult financial situation.
Deciding If You Need Life Insurance: By Age
Just like life stages significantly impact who needs coverage, age can also be a determining factor. As you get older, your lifestyle, family structure, income and overall life insurance needs usually change.
Life Insurance for Millennials
Millennials are adults that fall between the ages of 20 and 36 in 2017. While the younger side of this generation is currently in college or just graduating, the higher end of this group is well into adulthood and likely getting married, buying a house and having children.
In fact, 9,000 babies are born each day to Millennials. Having a child is arguably one of the most impactful financial moments, as you now have another person who fully relies on you for care and financial support. When you are a parent, life insurance coverage becomes essential because you need to protect your ability to support your child financially.
As a Millennial, you’ll likely need life insurance if you:
- Are married and share financial obligations
- Have children or are planning to have them soon
- Have debts, such as a mortgage, cosigned school loans or medical expenses, and not enough assets to cover them
- Are a stay-at-home mom or dad
- Don’t have enough savings to cover burial and final expenses
In this generation, you probably don’t need life insurance if you:
- Are single and have no kids or financial dependents
- Don’t have cosigned debts that your family will need to pay off
Not only is life insurance relevant to Millennials, but an added benefit is that coverage is most affordable when you’re young and healthy.
Life Insurance for Gen X
Generation X applies to adults born between 1965 to 1976. Because adults in this generation are in their late 30s and 40s, it’s highly likely they have a mortgage, and other shared debts, and have a spouse and children who rely, at least in part, on their income.
This is usually when protection from a life insurance policy is most important. And even if you already have life insurance that you purchased several years ago, now is the perfect time to reassess your needs and consider more coverage to take care of your growing responsibilities.
Once you own a house, you’ll want to make sure you have enough life insurance coverage to pay off your mortgage in the event of your death. Once you get married or enter a lifelong partnership, you need life insurance to make sure your spouse or partner is financially protected. And, once you become a parent, you need life insurance to help replace your income until your children grow up and leave home.
The good news is that life insurance for Gen Xers can still be very affordable. For example, a 20-year $750,000 Haven Term policy for a healthy 40-year-old woman could be about $36 a month.
When buying life insurance, Gen Xers should consider:
- Coverage that can help pay off your mortgage and debts shared with your spouse or partner
- A policy term length that lasts until your kids are adults
- If you have enough savings to cover a funeral and other final expenses
- If you have an existing policy, whether you’ve gone through life stages that increase your coverage needs. For example, having a second child.
- Life insurance gets more expensive as you get older, so the time to act on coverage needs is now
Life insurance needs aren't one-size-fits-all.Calculate your needs
Life Insurance for Baby Boomers
While most Baby Boomers (adults born between 1946 and 1964) no longer have young children in the house, there may still be a need for life insurance. However, it’s important to know that buying coverage is going to be more expensive for this age group, so be selective. Only buy a policy if there is a specific need. If you don’t need coverage, the money you would be paying for coverage could be better utilized by building a larger financial cushion through savings.
If you’re a Baby Boomer who is trying to decide if you should buy a policy, ask yourself:
- Do you have a mortgage or other cosigned debts that your spouse couldn’t cover on their own?
- Do you have financial dependents, such as a non-working spouse, children or elderly parents, who rely on your income
- Would your family be in need of extra cash to cover a funeral or final expenses?
If you answered, “yes” to at least one of the questions above, and don’t feel as if you have enough assets or savings for your family to be financially comfortable, then you might need a policy. A good way to find out for sure is by using an online life insurance calculator, which can help you determine how much life insurance you need and which term length to choose.
Remember: when shopping for a policy as a Baby Boomer, the term length, in particular, will significantly impact your premium per month. For example, a 20-year, $500,000 policy would cost a 60-year-old woman in “very good health” $172 per month. If you lessen that term length to 15 years, the premium drops to about $125 per month.
Calculating How Much Life Insurance You Need
No matter your age or family structure, it’s very simple to determine if you need life insurance, and, if so, receive a recommendation for how much coverage you should purchase.
An online life insurance calculator will take into consideration numerous factors including your age, income, marital status, how many kids you have and any debts you need to cover. No need to do the air math yourself.
Who Needs Life Insurance? Most People
At some point in your life, it’s likely you’ll need life insurance. What’s most important is that you understand the key life milestones that impact your coverage needs and ensure that you’re taking appropriate steps to protect your family financially.
If at any point in the next few years you:
- Get married
- Have a child
- Purchase a home or accumulate additional cosigned debt
- Become a stay-at-home parent or have a spouse that decides to stay home with the kids
… Then you should revisit your life insurance needs to ensure your family is adequately covered.
Buying life insurance is easier now than ever before, and its core value remains the same: to make sure your loved ones are protected no matter what. Coverage can be very affordable and, even more importantly, the peace of mind is priceless.