Who needs life insurance & why?

You likely need life insurance coverage if you have shared debts or someone who relies on your income.

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By

Amanda ShihEditor & Licensed Life Insurance ExpertAmanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.&Katherine MurbachEditor & Licensed Life Insurance AgentKatherine Murbach is an editor and a former licensed life insurance agent at Policygenius. Previously, she wrote about life and disability insurance for 1752 Financial, and advised over 1,500 clients on their life insurance policies as a sales associate.

Edited by

Antonio Ruiz-CamachoAntonio Ruiz-CamachoAssociate Content DirectorAntonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.
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Reviewed by

Maria FilindrasMaria FilindrasFinancial AdvisorMaria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

Updated|2 min read

Expert reviewedExpert reviewedThis article has been reviewed by a member of ourFinancial Review Council to ensure all sources, statistics, and claims meet the highest standard for accurate and unbiased advice.Learn more about oureditorial review process.

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Life insurance ensures your family is protected financially if you die.

According to a study conducted by LIMRA, 42% of American households would struggle financially if a wage earner died unexpectedly. [1]

And a recent Policygenius survey found that 49% of the sandwich generation (people with a parent age 65 or older who also are raising children or supporting adult children) doesn’t have life insurance to help financially support their loved ones after they die.

Key takeaways

  • Spouses, parents, caretakers, and business owners are examples of people who may need life insurance.

  • If you are the co-signer of a loan, you and your co-signer should both get life insurance.

  • If no one currently relies on you for financial support, but you expect that to change in the next few years, it may make sense to buy life insurance now to lock in cheaper rates.

Do I need life insurance?

If you’re unsure if you need life insurance, the simplest question to ask yourself is: Does anyone in my life benefit from or need my financial support?

If your answer is yes — whether it’s your children, your spouse, an aging parent, a business partner, or even the co-signer of a loan — then you probably need life insurance.

Why do you need life insurance?

A life insurance policy works so that if you die while the policy is active, your beneficiaries will get a lump sum of money, tax-free.

Your beneficiaries will be able to use the death benefit for whatever they need. Common uses include:

  • End-of-life expenses: Including funeral and medical bills

  • Outstanding debts: Including mortgages, credit card debt, private student loans, and car loans

  • Childcare and other child-rearing expenses: Including camp tuition, sports fees, and other expenses

  • College tuition: Including room and board

  • Time: Including time to grieve or to move without having to worry about work

Who needs life insurance?

If people depend on your income, then it’s very likely that you need life insurance. Some common categories of people who need life insurance include: 

  • Parents and future parents. If you’re a parent or plan to have children, your children will be financially dependent on you while they grow up. A life insurance policy can help cover the costs of childcare if you died prematurely.

  • Spouses. If you’re married, you typically share financial responsibilities with your spouse. Life insurance ensures that if one spouse dies, the other can continue living the lifestyle they had worked for together.

  • Students with co-signed student loans. Although federal student loans are forgiven if the borrower dies, private student loans transfer to the co-signers. Life insurance for students protects co-signers of private student loans from owning that debt if the student were to die. 

  • Business owners. Entrepreneurs may need a life insurance policy to ensure their business can continue without their contributions. Business owners can list their business partner or heir as their beneficiary.

  • Primary caretakers. If you care for a child with disabilities, an aging parent, or another family member, life insurance can ensure that your loved one continues to get care if you die. You can also set up a trust for the death benefit if receiving a large life insurance payout could disqualify your loved one from receiving government benefits.

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

If you’re young and have no dependents who rely on your income, you may not need life insurance right now. But there are some instances when it would still make sense to have a policy. Ask yourself these questions:

  • Can your loved ones afford the cost of an unexpected funeral? The average funeral costs more than $7,000. Your beneficiaries can use your death benefit to cover those expenses.

  • Did someone co-sign a loan for your home or car? If you have a co-signer, they’ll be responsible for the remaining balance if you die. A life insurance death benefit can cover the costs for your co-signer so they aren’t left to pay the balance alone.

  • 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 to expand your family in the next few years, you can often lock in cheaper premiums by buying a life insurance policy now. 

“If someone knows or expects they will have an insurable need soon, we recommend locking in coverage while you are younger and (usually) healthier,” says Patrick Hanzel, certified financial planner and advanced planning manager at Policygenius. “We recommend owning coverage as you would five years from today.”

That’s because buying life insurance when you’re young can save you money. Each year you delay buying a policy, the average cost of premiums rises by 4.5% to 9%.

Take a look at the term life insurance rates below to see how they increase by decade.

20-year term life insurance rates

Age

Gender

$250,000 coverage amount

$500,000 coverage amount

$1 million coverage amount

20

Female

$15.01

$22.66

$33.63

Male

$19.19

$30.20

$47.61

30

Female

$15.17

$22.99

$36.90

Male

$18.19

$29.33

$48.88

40

Female

$21.66

$35.27

$60.64

Male

$25.38

$42.94

$75.25

50

Female

$43.92

$78.30

$139.47

Male

$56.69

$102.50

$188.26

60

Female

$107.84

$194.16

$354.64

Male

$149.38

$268.09

$500.17

Collapse table

Methodology: Average monthly rates are calculated for male and female non-smokers in a Preferred health classification obtaining a 20-year $250,000, $500,000, or $1,000,000 term life insurance policy. Life insurance averages are based on a composite of policies offered by Policygenius from Brighthouse Financial, Corebridge Financial, Legal & General America, Lincoln Financial, Foresters Financial, Mutual of Omaha, Pacific Life, Protective, Prudential, Symetra, and Transamerica. Rates may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 01/01/2024.

Ready to shop for life insurance?

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Who doesn’t need life insurance?

  • Retirees may not need life insurance because they no longer have dependents. Oftentimes, retirees have paid off major debts and have enough saved to pay for a funeral, such that their loved ones won’t be financially impacted by their death. 

  • Children don’t earn income to support their family, so child life insurance isn’t necessary in most cases.

→ Learn more about the advantages and disadvantages of life insurance

The bottom line: When is life insurance necessary?

If someone depends on you financially (either because they’re your spouse, child, or business co-owner), or you have a co-signed loan or mortgage, or you expect either of those things to change in the next few years, it’s worth having life insurance.

With a life insurance policy, you’ll be able to protect your loved ones and/or co-signers from financial hardship if you die.

If no one depends on you financially and you’re planning on keeping it that way for the next several years, you probably don’t need life insurance.

But if you do get married, have a child, co-sign a loan, become a primary caretaker, or start a business, you should reassess — and get covered.

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

More about how much life insurance you should buy

Frequently asked questions

Is it important to have life insurance?

It’s important to get life insurance as soon as you have — or are planning to have — dependents or shared debts. Without a policy, your loved ones can be without necessary financial support when you die.

How much life insurance do you need?

You should have enough life insurance to help your beneficiaries cover any expenses and financial obligations they’d be responsible for in the event of your death. A common rule of thumb is to buy a life insurance policy with a coverage amount that’s 10 to 15 times your income, but it depends on your personal financial situation.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of oureditorial standards.

  1. LIMRA

    . "

    You Know You Need it. Let’s Talk About Life Insurance

    ." Accessed October 16, 2023.

Authors

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Katherine Murbach is an editor and a former licensed life insurance agent at Policygenius. Previously, she wrote about life and disability insurance for 1752 Financial, and advised over 1,500 clients on their life insurance policies as a sales associate.

Editor

Antonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

Expert reviewer

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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