Q
Do I need life insurance?
A
If you have shared debts or anyone relies on your income for their financial wellbeing, you should consider getting life insurance coverage.
KEY TAKEAWAYS
Life insurance offers your family financial protection when you’re gone
If anyone in your life relies on your income you probably need life insurance
Buying life insurance when you’re young can save you a lot of money
A wide variety of scenarios warrant buying life insurance, but the simplest rule of thumb to determine who really needs life insurance is: Does anyone rely on your income for their financial wellbeing? This could be a child, spouse, aging parent or even the cosigner of a student loan who would get stuck with the debt if you weren’t around to pay it off.
If the answer is yes, you probably need life insurance.
In this article:
Do I need life insurance?
Life insurance replaces the financial support you give to others in the event you’re no longer there to provide for them.
Take a look at the table below to see if you are a likely candidate for life insurance.
| You are a… | How life insurance can help |
|---|---|
| Parent | Helps with everyday costs, along with saving for college tuition and other milestones in your child’s future. |
| Spouse | Makes sure you’re covered if you have a mortgage that requires both partners’ salaries for the payments, or if one partner earns the lion’s share of the income to support your lifestyle. |
| Student | While federal student loans are forgiven if the borrower dies, private student loans transfer the debt to the co-signers. Having life insurance can keep them from being stuck with the debt. |
| Entrepreneur | If your business would cease to exist without you, naming a business partner as a life insurance beneficiary could be helpful. The death benefit can also be used to buy out any remaining shares of the business. |
Still curious if you need life insurance? Take a look at this flowchart to see where you fall.
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 examples of people who usually don’t need term insurance:
Retirees - Ideally, by the time you reach retirement age your children should be 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 and some insurance agents may even try to sell you one, it’s not typically recommended because children are not earning a wage or supporting the family.
This isn’t to say that no one in the above scenarios needs life insurance. Individual circumstances should be taken into account. But it’s important to think twice about whether or not it’s truly necessary.
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Do I need life insurance if I don’t have any dependents?
You may be thinking there’s no sense in purchasing life insurance while you have no dependents. By buying life insurance when you’re young, you can make your coverage last longer for the money. As Patrick Hanzel, Policygenius’ Advanced Planning Specialist and Certified Financial Planner points out, “If someone knows or expects they will have an insurable need in the near future, we recommend locking in coverage while you are younger and (usually) healthier. I recommend owning coverage as you would five years from today."
I recommend owning coverage as you would five years from today.
Take a look at the term life rates below to see how they increase decade by decade.
| Age | $250,000 | $500,000 | $750,000 | $1,000,000 |
|---|---|---|---|---|
| 25 | $17.45 | $27.57 | $38.59 | $45.84 |
| 35 | $19.15 | $31.02 | $43.75 | $52.20 |
| 45 | $35.87 | $61.21 | $89.11 | $113.21 |
| 55 | $85.81 | $150.94 | $220.28 | $279.98 |
Methodology: Sample based on a 20-year term life insurance policy for a non-smoker male in Preferred health rating.
How much life insurance do I need?
Once you’ve determined that you need life insurance, the next step is to calculate exactly how much coverage you need. A general rule of thumb is to multiply your income by 10-12. So if your current salary is $50,000, you can estimate that you’ll need $500,000-600,000 in life insurance coverage.
Learn more about how to calculate how much life insurance you need.
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Yes, we have to include some legalese down here. Read it larger on our legal page. Policygenius Inc. (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best efforts to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application. Savings are estimated by comparing the highest and lowest price for a shopper in a given health class. For example: for a 30-year old non-smoker male in South Carolina with excellent health and a preferred plus health class, comparing quotes for a $500,000, 20-year term life policy, the price difference between the lowest and highest quotes is 60%. For that same shopper in New York, the price difference is 40%. Rates are subject to change and are valid as of 2/17/17.
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