Life insurance ensures your family is protected financially if you die. Having a policy is important for anyone who has people who depend on them financially.
According to a study conducted by LIMRA, 42% of American households would struggle financially if a wage earner died unexpectedly. 
And a recent Poligygenius 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.
Do you 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?
So you have dependents — why do you need to buy insurance to protect them? A life insurance policy works so that if you die while the policy is active, your beneficiaries will get a lump sump 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 that need life insurance include:
Parents and future parents
Parents need life insurance so that their children will continue to be supported financially if they die.
From early-life costs like formula, diapers, and childcare to college tuition, the costs associated with raising children are high, and life insurance will help your child’s remaining guardian care for them.
Even non-working parents need life insurance, as the work they do, including childcare, will need to be replaced.
Married people need life insurance so they can be covered for shared expenses or loans if one spouse dies. When people get married, their lifestyle is the result of two salaries, or two contributors to the household.
Life insurance ensures that if one spouse dies, the other can stay in their home, continue to pay their mortgage, and continue living the lifestyle they had worked for together.
Students with co-signed student loans
Life insurance is often used as income replacement, and students don’t usually have income that needs to be replaced.
But they can have debt that would need to be covered if they died, and for that reason some students do need life insurance. Federal student loans are forgiven if the borrower dies, but 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.
Entrepreneurs and business owners
Many business owners will have life insurance because they’re married or have children, but they may need an additional policy to protect their business partners and employees.
In this case, the business or the business partner could be the beneficiary, and the policy would ensure that the business would be able to keep operating even if you die.
If you care for a child with disabilities, an aging parent, or someone else, life insurance can ensure that your loved one continues to get care if you die.
You’ll want to set up a special needs trust to be the beneficiary of the life insurance payment, because a large life insurance payout could disqualify your loved one from receiving government benefits.
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 unexpected funeral or medical expenses if you die?
The average funeral costs more than $7,000. Your beneficiaries can use your death benefit to cover those expenses. The remaining balance could provide financial security to your loved ones or even be donated to a charity of your choosing.
Did someone co-sign a loan for your home or car?
If your parents or someone else in your life co-signed a loan with you, they’ll be responsible for the remaining balance if you die. A life insurance death benefit can cover that outstanding debt for your co-signer so they aren't left with the balance if you die.
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 a cheaper premium 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 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
$250,000 coverage amount
$500,000 coverage amount
$1 million coverage amount
Who can skip buying life insurance?
Not everyone needs life insurance, even if they play an important role in their families’ lives. Here are two examples of people who usually don’t need insurance:
Ideally, by the time you reach retirement age, your children are financially independent and you’ve paid off your major debts. At this life stage, there’s no real need for life insurance, and you can likely self-insure.
However, if you have a large estate, you may want a policy to help decrease the burden of estate taxes.
While many life insurance companies offer policies specifically designed to cover your children, we don’t recommend it because children don’t earn wages or support a family. As a result, they don’t need 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.