Many people believe that life insurance is for families. If you’re married with kids, taking out a life insurance policy is a responsible thing to do to ensure your spouse and children have financial help after your passing.
But what if you’re single and not responsible for supporting a family? Is life insurance necessary for you?
Ultimately, the decision depends on your financial circumstances. If you don’t have a spouse or children who rely on your income for daily needs, life insurance may not be necessary. But there are many situations in which single people could benefit from a life insurance policy.
Here are the most common reasons a single person may consider investing in life insurance.
You have debt
A life insurance policy can provide financial support to anyone who has helped you secure loans. Today’s average student loan is $28,950 per borrower. If a loved one cosigned for private loans, they will be required to continue paying after your passing. Federal loans are usually discharged at the time of death, but private student loans continue until paid.
The same applies to home mortgages or credit cards that a friend or relative cosigns. Instead of leaving others the burden of repayment, a life insurance policy steps in and helps pay off your portion of the loan.
You provide financial support to others
Life isn’t always clear-cut. Just because you’re single doesn’t mean you don’t have financial obligations on another’s behalf. Maybe you provide care for an elderly parent who lives with you. Or perhaps you provide financial help for a disabled sibling. How would your loved one handle it if you were to die unexpectedly? A life insurance policy allows you to name them as beneficiaries, which can fully protect their financial support.
You want to cover your final expenses
Being responsible means thinking ahead about all life’s possibilities. As a single person, ensuring your final wishes are met and fully covered financially can give you peace of mind. Today the average cost of a funeral is $7,848. A life insurance policy would give loved ones the final gift of direction as they deal with your loss without undue financial burden.
You want to grow your wealth
While life insurance is primarily thought of as death insurance because it pays beneficiaries in the event of your untimely death, some life insurance has wealth benefits while you’re alive, too. Term insurance is an efficient way to purchase life insurance at a lower rate while you’re young and healthy, based on serious health risks for later life in your family.
Permanent insurance, also known as whole life, guarantees rates and benefits for the policy’s life. Many contain “living benefits” that range from tax-free investment earnings to zero-interest loans. Some of these living benefits allow individuals to take out tax-free loans and access extra cash when needed. When applied to an overall wealth strategy, some whole life policies offer benefits now that an individual would be hard-pressed to find elsewhere.
You choose to lock in coverage
Your age and health affect whether you qualify for life insurance and how much it costs. Generally, a younger person will have an easier time getting a policy such as whole life insurance and pay less for it. That makes it easy to lock in a low rate while you’re still young.
Older singles may also wish to purchase final expense insurance, which is exclusively designed to help people in their 70s and 80s take care of end-of-life expenses on their own. This can bring peace of mind knowing your family won’t have the added burden of paying for a funeral or cremation.
You own a business
A life insurance policy is often a wealth-building strategy for a growing company. If you take out a business loan, many financial institutions will require a life insurance policy as security. It’s to ensure the loan will be paid back in full in case you die before it’s fully paid off.
Life insurance can also help keep your business operational until other arrangements can be made. When two or more partners operate the business together, a life insurance policy is a wise business decision that will provide breathing room for corporate changes after one partner dies. Known as a “key person” policy, it’s designed to keep the business afloat after you die until your survivors can reorganize.
You choose to leave a legacy
Life insurance isn’t just about caring for loved ones and a family. Many single people take out a life insurance policy to leave a legacy. If you have a cause near and dear to your heart, naming an organization as a beneficiary is a great way to leave something behind in your honor. They will receive the donation when you pass away, and you can specify how the funds should be used.
Do You Need Life Insurance?
If you’re single, considering life insurance and still have questions, it’s best to meet with a financial planner or advisor to help you understand life insurance and find the best policy. They can help you with costs, provide guidance on how to structure your policy, and help you define beneficiaries to your exact specifications.