Q

Who needs life insurance and why?

A

Anyone who has shared debts or someone who relies on their income should consider getting life insurance coverage.

Amanda Shih author photoRebecca Shoenthal author photo

By

Amanda Shih

Amanda Shih

Editor & Licensed Insurance Expert

Amanda Shih is an insurance editor and licensed Life, Health, and Disability agent at Policygenius in New York City. Her work has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

&

Rebecca Shoenthal

Rebecca Shoenthal

Licensed Insurance Expert

Rebecca Shoenthal is an insurance editor and licensed Life, Health, and Disability agent at Policygenius in New York City. Previously, she worked as a nonfiction book editor. She has a B.A. in Media and Journalism from the University of North Carolina at Chapel Hill.

Updated April 9, 2021|3 min read

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There are many reasons you may need life insurance. If you’re unsure if you need it, the simplest question to ask yourself is: Does anyone in my life benefit from or need my financial support? This could be a child, spouse, aging parent, business partner, or even the cosigner on a student loan who would get stuck with the debt if you weren’t around to pay it off.

If you answered yes, you probably need life insurance.

Key Takeaways

  • Life insurance offers your family financial protection when you’re gone

  • Buying life insurance when you’re young saves you money on premiums in the long run

  • Life insurance can cover the cost of your funeral, your family’s everyday expenses, and any debts you leave behind

Do I need life insurance?

Should something happen to you, life insurance ensures your loved ones are protected financially. Having a policy is important for anyone with dependents, and has become even more pivotal during the current outbreak of COVID-19. According to a study conducted by LIMRA, the percentage of Americans who felt a "heightened need for life insurance increased from 49% to 58%" from March 2020 to July 2020.

Whether or not you need life insurance depends on your individual circumstances. Take a look at the table below to determine if you are someone who needs life insurance.

IF YOU ARE A…YOU MAY NEED LIFE INSURANCE BECAUSE:
ParentLife insurance helps with the everyday expenses of raising a child, along with saving for college tuition and other milestones in your child’s future.
SpouseLife insurance guarantees you’re covered for any shared expenses or loans.
StudentWhile federal student loans are forgiven if the borrower dies, private student loans transfer the debt to the cosigners. Having life insurance keeps your loved ones from being stuck with debt.
EntrepreneurIf you are a business owner, you can name a business partner as the life insurance beneficiary. The death benefit can be used to keep the business running or to buy out any remaining shares of the business.
CaretakerWhether you care for an adult child with disabilities, an aging parent, or someone else, life insurance can provide financial coverage so your loved ones can find new aid if something happens to you.

→ Learn more about the process of buying life insurance

How much life insurance should I get?

Life insurance is meant to be an income replacement when you pass away. When you die, your beneficiaries file a claim to receive your policy proceeds. Policygenius’ experts recommend you multiply your income by 10-15 times as a starting point. However, your coverage should encompass all of your anticipated financial obligations, including debts, children, or aging parents.

Don't forget to include any riders that can customize your policy for your needs.

→ Learn more about determining how much life insurance you need

Ready to shop for life insurance?

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Do I need life insurance if I don’t have any dependents?

You may not think it’s worth buying life insurance while you have no dependents. But getting life insurance when you’re young can make your coverage last longer and save you money.

Patrick Hanzel, Policygenius’ Advanced Planning Specialist and Certified Financial Planner points out, “If someone knows or expects they will have an insurable need soon, we recommend locking in coverage while you are younger and (usually) healthier. We recommend owning coverage as you would five years from today."

Each year you delay buying a policy, the average cost of premiums rises by 4.5-9%. Take a look at the average term life insurance rates below to see how they increase by decade.

AGEGENDER$500,000 COVERAGE AMOUNT
25Male$25.82
Female$20.91
35Male$29.13
Female$24.51
45Male$59.38
Female$46.45
55Male$151.82
Female$106.30

Methodology: Sample premiums are for male and female non-smokers with a Preferred health rating based in Ohio; Life insurance averages are based on a composite of policies offered by Policygenius from AIG, Banner, Brighthouse, Lincoln, Mutual of Omaha, Pacific Life, Protective, Prudential, SBLI, and Transamerica and may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 4/09/2021.

quote

We recommend owning coverage as you would five years from today.

- Patrick Hanzel, Advanced Planning Specialist and Certified Financial Planner

If you are young and have no dependents, ask yourself:

  • Can your loved ones afford the cost of unexpected funeral or medical expenses if you die? The average funeral costs $8,000-10,000. Your beneficiaries can use your death benefit to cover those expenses. If you become sick or injured and need medical care, the benefit can be put toward any costs that health insurance does not cover.

  • Did someone cosign a loan for your home or car? Just like a student loan, they’ll be responsible for the remaining balance if you die. A life insurance death benefit can cover that outstanding debt for your cosigner as well.

  • Do you plan to have children in the near future? Many people wait until their children are born to purchase life insurance. But if you know you want kids down the line, you can lock in a cheaper premium by buying a life insurance policy now. 

Even if you won’t need the full coverage amount to cover final expenses and debt, the remaining balance could provide financial security to your loved ones or even be donated to a charity of your choosing.

Still not sure if you need life insurance? Take a look at this flowchart to see where you fall.

Policygenius Do I Need Life Insurance Flowchart

Who doesn’t need life insurance?

Not everyone needs life insurance, even if they play an important role in their families’ lives. Here are a couple of examples of people who usually don’t need term insurance:

  • Retirees - Ideally, by the time you reach retirement age your children are financially independent and you’ve paid off your major debts. At this stage of life, there’s no real need for life insurance.

  • Children - While many life insurance companies offer policies specifically designed to cover your kids, it’s not typically recommended because children don’t earn wages or support a family.

While life insurance isn’t typically necessary for retirees or children, some individual circumstances may suggest that life insurance would be beneficial. For example, if you have a large estate, you may want a policy to help decrease the burden of estate taxes

Bottom line: If you have outstanding debts, dependents, or aren’t nearing retirement age, it’s better to get life insurance sooner rather than later.

→ Learn how to find the best life insurance policy for you

Do I need life insurance FAQ

How much life insurance do I need?

Your life insurance death benefit should be at least 10-15 times your income and should factor in financial obligations like childcare or college tuition, end-of-life expenses, and any debts you have.

Who doesn’t need life insurance?

You don’t need to buy life insurance for your children, since you don’t rely on them financially. If you’re retired with no debt and no dependents, you may also be able to forgo getting a policy.

At what age should you get life insurance?

You should get life insurance as soon as you have — or are planning to have — dependents or shared debts. Life insurance is more affordable when you’re young and healthy, and prices increase 4.5-9% each year you don’t buy coverage. The younger you are when you buy a policy, the less you’ll pay for coverage over several decades.

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Life insurance supports your family’s current and future financial needs by paying out a lump-sum cash benefit when you die.

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