Life Insurance For Single People: Why You Need It
If you dont think life insurance as a single person is necessary, it could be time to change your tune. Life insurance for single people has many benefits, including the ability to build wealth. In this guide, weve got all the details you need about getting a life insurance policy if youre single. So read on and find out about the type of coverage that could be just right for you.
Dont Leave Your Kids Holding The Bag
Kelly, a single mother, always thought it would be a good idea to buy life insurance to protect her children, but something always seemed to get in the way. Money was tight, or time was tight and she just never got around to it.
Years later, Kelly purchased a small home her daughter was then 18 years old and her son was 14. While she didn’t exactly live paycheck to paycheck, her budget was pretty tight and didn’t allow her much room for savings.
One night while driving home from work, Kelly was struck head-on by a distracted driver. She died instantly. While Kellys children were forced to deal with the tragic loss of their mother, they also had to face the fact that she left behind only a few thousand dollars in the bank and no life insurance, leaving them essentially broke after covering the cost of a very basic funeral.
That is why life insurance is important. Nobody knows what is coming around the corner. If you die unexpectedly, you can leave your spouse or children in a very tight spot.
Term life insurance is extremely affordable. A 20-year policy with a death benefit of $500,000 for a healthy female can cost as little as $25 a month.
Do I Need Life Insurance If I Am Young
Young people with no financial commitments do not need to take out life insurance.
But it can be worth starting early if any of the reasons in the bullet points above apply to you. A big advantage is that you benefit from cheaper premiums.
Young person life insurance does not exist as a standalone product. You would take out general life insurance but expect the cost to be cheaper the younger you are.
This is because younger people are likely to be in better health and are less of a risk to an insurance provider.
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You Carry A Great Deal Of Debt
Most debts owed solely in your name must be paid off by your estate after you die. Co-signed loans become the co-signers responsibility if you pass away before paying them off. Dying while carrying debts could mean your estate goes entirely toward paying off your . This could leave any loan co-signers on the hook for debts you agreed to pay. Life insurance can help pay off your debts so they dont affect your heirs.
Whole Or Permanent Life Insurance
Whole life insurance is exactly what it sounds like: life insurance that can last your whole life. This is great for couples who want a bit more stability when it comes to their life insurance and are interested in building whats called cash value in their policies. Whole life insurance is typically more expensive than term life insurance, but because it wont terminate after a set amount of time, your policy will stay active as long as you pay your premiums.
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How To Choose A Beneficiary
A life insurance beneficiary is the person who can claim the death benefit after you pass away.
You can name multiple beneficiaries and decide what percentage they each will receive when you die. Additionally, you should add contingent beneficiaries who will receive the death benefit if your primary beneficiaries have died.
Not everyone names people as beneficiaries. Some people name trusts. By creating a revocable living trust and naming it as the life insurance beneficiary, you can ensure that the money is used according to your wishes. For example, the trust money could be used to take care of children.
If you decide to name a trust the beneficiary of your policy, make sure to work with an attorney to structure the trust correctly. Its also wise to work with a financial planner so that a trust is part of your larger financial plan.
Its crucial to update and review your beneficiary selections regularly. For example, life events such as a marriage or a divorce can impact your selection.
To update your beneficiaries, contact your life insurer and submit a change of beneficiary form. Making changes only on a will wont affect life insurance.
Reasons Why You Need Life Insurance
It seems there are certain events in peoples life that prompt them to buy life insurance. So, if youre asking yourself the question do I need life insurance? then this is where you may find your answer.
No one likes to think about a time after theyve gone, but life insurance could offer reassurance and comfort to you and your loved ones for this situation.
For most of us, life is a series of important milestones that may cause us to think about the future. Inevitably, when we think about our life and beyond, we cant help but think of what may happen to the people we leave behind. Its possible that your dependents or next of kin may become financially responsible for any of your outstanding debts or expenses like childcare costs, a mortgage or even funeral, medical or care costs.
Even if you have been careful with your finances and have no outstanding debts, you may simply wish to leave a legacy to your loved ones, help to contribute to the future cost of living for any dependents or give a small sum to help cover the cost of your funeral.
Whether you wish to leave £5,000 or £500,000, making this provision early can offer you peace of mind.
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Life Insurance May Not Be As Expensive As You Assume
Lets address this first, because it seems to be a stumbling block for many people.
While the cost of life insurance coverage depends on a lot of variables like age, sex, overall health and type of policy, it typically costs far less than people think.
In fact, for healthy people under age 40, a $500,000 20-year term policy can be less than $37 per month for men and $33 for women. If you’re under age 30, it can cost less than $30 per month.2
Naturally, as you age, buying life insurance becomes more expensive because your health declines and the odds of dying sooner increase. So lock your rate in now while youre young and healthy and save yourself from paying a higher premium later.
Six Reasons Why To Buy Life Insurance
You buy life insurance because its the best way to protect your loved ones. Its a financial decisionkind of. Its an emotional decisionsort of. Its about love and caring and the futuremost definitely.
Still, millions of people buy life insurance every year for reasons that are often difficult to express. At the same time, the reasons are simple and obvious. Thats the thing about life insurance. The idea may be simple, but the reasons behind it cut deep, to our very corealmost to an instinctive level.
At the heart of it, if you’re like most people, you buy life insurance for six very good reasons.
- Life insurance is about taking care of loved ones.
Its about meeting responsibilities and keeping promises. You view your decision to purchase life insurance from your family’s point of view, not your own. You see life insurance as a tool that protects your spouse and children from the potentially devastating financial losses that can result if you die prematurely.
- Life insurance is for the living.
It’s not about you. You know that, should anything happen to you, the life insurance you have purchased is in place to protect and provide financial relief for those who must carry on without you. Its about them.
- Life insurance is an expression of love and caring.
Because you care about your family, you want to ensure the financial security of family members if youre suddenly not around to provide it.
- Life insurance buys time and options.
How Much Life Insurance Do You Need
The amount of life insurance you need will vary from person to person and family to family. Here are a few general pointers from my perspective.
Get enough life insurance to cover your large debts vehicle loans, mortgages, vacation homes, etc. If you are the sole breadwinner in your family, youd want additional coverage to account for several years worth of your salary on top of the debts.
Basically, youd want enough so your immediate family doesnt have to worry about how they are going to pay for where they live, food, and their immediate needs.
In doing some research, I found that Dave Ramsey recommends 10-12 times your income.
Thinking of all the things that youd want to have the life insurance cover this is the reason that the small amount offered through a workplace policy isnt going to be enough.
If youre married, youd want to get life insurance on both of you, so the other one is covered in case one of you dies. This is even important if one of you stays at home because then it would cover things such as childcare and the other numerous duties you have around the house.
Community Feedback On Purchasing Life Insurance
When I asked the community about the life insurance question, I expected most women to be strongly against having life insurance at our age. However, as it turns out, were split pretty evenly down the middle.
Equally interesting were the reasons that the women in our community gave for keeping their life insurance. While few of us see life insurance as a way to leave money for our loved ones, we all want to reduce the stress that our loved ones would feel should we pass away.
Along these lines, several women in the community said that they have decided to keep a small policy to cover their funeral expenses. As Valerie R. said, If I dont have insurance then my children will be stuck with the bill for burying me. So I will keep mine just not as much.
Another group of women said that they had purchased universal or variable life insurance policies that could be cashed in. For these women, life insurance is a kind of forced savings account.
Finally, there were some women who had been paying into an insurance policy for a long time and just couldnt bring themselves to cancel. As one woman said, I have an insurance policy so that I can give my children a final gift. I hope this will help to insulate them from the financial realities of the growing economic gap that faces hard-working people.
Obviously, theres no right or wrong answer here. Still, its fascinating to hear how our perspectives differ on this important issue. Lets keep the conversation going!
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Types Of Life Insurance
As mentioned in the general discussion of insurance, there are two basic types of life insurance, term and cash value. Here are some key differences to help you decide which type might be best for you:
Term insurancethe best low-cost insurance for a limited time
- Term life insurance is pure insurance. You buy a specific amount of coverage for a certain length of time, which can be from five to a maximum of 30 years.
- In general, premiums are guaranteed by the insurance company and can’t be raised during the term you select. For this reason, you may want to consider buying an initial policy for the maximum number of years. You can always stop paying the premiums and cancel the coverage if your circumstances change.
- There is no cash value to the policy. If you don’t use it during the term of the policy, there is no refund of your premiums.
- Term life is by far the least expensive and a good choice for young families wanting to make sure basic expenses are covered.
Cash value insurancehigher-cost, lifetime insurance with an investment component
It Can Help Your Loved Ones Pay Off Debt
Certain types of debt don’t go away when you die, which means your loved ones may have to use money from your estate or sell off other assets to cover them. This could leave less money to pay for expenses.
Life insurance can help your loved ones pay for any debt you leave behind, including credit card debt, business debt, personal and/or educational loans and mortgage debt. At a time when your loved ones are already dealing with your loss, life insurance can help ease some of the financial burdens they may experience after your passing.
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Types Of Insurance You Need
You can insure almost any part of your life. But not every type of coverage is right for every person. In most cases, you will want to cover your life, your health, and your property. This means you should have:
- Health insurance to cover medical costs for you, as well as your spouse or children if you have them
- Life insurance to provide for your family or cover your debts after your death
- Homeowner’s or renter’s insurance to cover your home and valuable property
- Auto insurance to protect your car
When picking a plan, think about how much it needs to cover. You also need to know what premium you can afford per month.
Choosing a deductible is another factor in picking a plan. A larger one means your monthly premiums will be lower. But it also means it will take longer for your insurance to kick in and start taking care of costs.
Supplement Your Financial Safety Net
In addition to life insurance, its important to build your financial safety netduring your lifetime through regular investment strategies that will support and protect both you and your loved ones. MoneyLion investment accounts are one of the best ways to create this financial safety net. Good financial planning is a life-long activity. It involves taking the steps to build wealth, invest money, and manage debts. MoneyLion can help you to build this life-long financial security.
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How Much Does Life Insurance Cost
The cost of life insurance varies significantly depending on several different factors. One of the biggest cost factors will be the type of life insurance you buy. For example, a term life insurance policy is significantly less expensive than a whole life insurance policy for the same amount of coverage.
Here are some of the most common factors affecting life insurance rates:
- Age. The younger you are when you buy a policy the less youll pay. Thats because your chance of death is smaller.
- Sex. Females have a life expectancy that is nearly five years longer than males, according to the National Center for Health Statistics. This means that men generally pay more for life insurance than women .
- Health. Your health has a major impact on your life insurance rates. The insurer will evaluate your past and current medical conditions in order to calculate your life expectancy.
- Lifestyle. Your driving history , criminal record, and dangerous occupations and hobbies can all result in higher life insurance rates.
You Work For Yourself Or Have A Family
She recommends a business-owned life insurance policy and business-owned disability insurance that names the business as the beneficiary so it can continue.
Also, if you get a business loan, most lenders will require life insurance like , where the bank is the beneficiary to payoff the loan in if the event the business owner dies. It’s similar to getting life insurance to cover private student loan debt.
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How Long Should You Protect Your Mortgage For
If you’re taking out life insurance to specifically cover your mortgage, it makes sense to take it over the same period of time. For example, if you intend to pay your mortgage off over 25 years, your life insurance should match this. But always remember to review your policy if you make any changes to your mortgage.
What Is The Minimum Amount Of Life Insurance You Need
A large part of choosing a life insurance policy is determining how much money your dependents will need. Choosing the face valuethe amount that your policy pays if you diedepends on a few different factors. As such, the minimum amount of coverage you need may be very different from what someone else requires. Financial experts often recommend purchasing 10 to 15 times your annual income in coverage, although your personal number may be higher or lower. Here are some of the most important considerations for choosing a minimum amount of life insurance.
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Are You Under 35 And Single
If you are under 35, unmarried and you dont have any kids, you probably dont need life insurance. Chances are you have a small life insurance policy through your work. All you want to make sure is that if you were to die unexpectedly that your family wont be stuck with paying expensive funeral costs or other debts like a car that they may be co-signors on. If you have a large joint debt remember that any co-signors are still responsible for covering the debt even if the primary borrower has passed away. Chances are large debts that have underlying assets that can be sold. If a house can be sold easily for more than the total due on the mortgage, for instance, you dont need to worry as long as the asset is going to go to your consignor if you die. There is just one exception.
If you have Student Loans and A Cosigner
If you have student loans and a family member or other friend co-signed on them, remember that even if you pass away they are stuck paying them until they are paid off. If you are in this situation you probably want to have enough life insurance to cover the amount left on the loan, even if you are young and single. If you are young and single chances are that a level term policy will be inexpensive enough that you can just carry the annual payment .