Who needs life insurance and why?

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

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Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

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.

&Rebecca Shoenthal

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

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Maria Filindras

Maria Filindras

Financial Advisor

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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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. [1]

Key takeaways

  • Anyone who has people who rely on their income for financial support needs life insurance.

  • Spouses, parents, caretakers, and business owners are just some people that 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 relies on you financially now, 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 you answer yes, whether about a child, spouse, aging parent, business partner, or even the co-signer of a loan, then you probably need life insurance.

Why do I need life insurance?

OK so you have dependents — why do you need to buy insurance to protect them? A life insurance policy ensures 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 that money 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

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. 

→ Learn more about life insurance for parents

Spouses 

Married people need life insurance so that they can be covered for shared expenses or loans if one spouse dies. When people get married, they combine their lives, and usually that means that their lifestyle is the result of two salaries. 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. 

→ Learn more about life insurance for spouses

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. 

→ Learn more about life insurance for students

Entrepreneurs and business owners 

Many business owners will have life insurance because they are 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. 

→ Learn more about life insurance for business owners

Primary caretakers 

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.  

→ Learn more about special needs trusts

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

If you're young and have no dependents that rely on your income, it's likely you don't 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 Team Lead 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 average term life insurance rates below to see how they increase by decade.

20-year term life insurance rates

Age

Sex

$250,000 policy

$500,000 policy

$1,000,000 policy

25

Female

$14.17

$21.06

$33.45

Male

$17.11

$26.89

$44.62

35

Female

$16.39

$25.43

$42.49

Male

$18.58

$30.14

$51.51

45

Female

$28.31

$47.71

$86.45

Male

$35.11

$60.58

$112.52

55

Female

$59.80

$108.44

$207.17

Male

$82.80

$150.39

$282.99

Methodology: Average monthly estimated rates for male and female non-smokers in a Preferred health classification with a 20-year term length. Rates are based on the monthly Policygenius Life Insurance Price Index. Prices in the index are determined by internal actuarial rate tables for life insurance carriers that offer policies through the Policygenius marketplace: AIG, Banner Life, Brighthouse, Lincoln Financial, Foresters Financial, Mutual of Omaha, Pacific Life, Protective, Prudential, SBLI, Symetra, and Transamerica. Illustration valid as of 12/01/2022.

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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:

Retirees

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. (However: if you have a large estate, you may want a policy to help decrease the burden of estate taxes.)

Children

While many life insurance companies offer policies specifically designed to cover your kids, we don't recommend it because children don’t earn wages or support a family. 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, you probably need life insurance. With a 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 find the one and get married, have a kid, 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

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.

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 a policy.

How much life insurance do I need?

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

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 our

editorial standards.
  1. LIMRA

    . "

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

    ." Accessed January 07, 2022.

Authors

Editor & Licensed Life Insurance Expert

Amanda Shih

Editor & Licensed Life Insurance Expert

gray twitter icon linkgray linkedin icon link

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.

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

gray twitter icon linkgray linkedin icon link

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

Expert reviewer

Financial Advisor

Maria Filindras

Financial Advisor

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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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