More on Life Insurance
3 times you think you don’t need life insurance (but actually do)
Life insurance coverage can offer protection in a few unexpected ways.
By
Nupur Gambhir
Published June 22, 2020|8 min read
Editorial disclosure
When you’re married and have dependents that rely on you financially, a life insurance policy is a necessity to protect them from financial suffering if you die unexpectedly. If you’re single and your paycheck is really only covering yourself, you may be thinking “do I really need life insurance then?” But contrary to popular belief, you may need life insurance coverage too.
If you think you don’t need life insurance because you’re single, don’t earn an income, or it’s just not a part of your estate planning strategy, you could be making a grave financial mistake. Life insurance coverage isn’t just an important protection for married couples with kids — it’s a necessary risk management tool for people in various stages of life.
Key takeaways
If you have cosigned debts and die with no life insurance coverage, your cosigner becomes liable for whatever you owe
Even if you are unemployed, your anticipated income or economic contributions to the household could warrant the need for a life insurance policy
Estate planning should include combining a will and testament with life insurance coverage to create a robust financial safety net for the heirs you leave behind
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You’re single
Just because you’re single and no one relies on you for an income doesn’t mean that your loved ones won’t be financially impacted by your death. There are a few instances where even without providing an income for your loved ones, you may need a life insurance policy to financially protect them. This could be if you have cosigners on a loan, want to plan for your parent’s care, or even if you have a pet!
You have cosigners on a loan
Even if you’re not covering the expenses of any dependents, your loved ones can still be financially impacted by your death if they’ve cosigned any of your loans, such as private student loan for graduate school or a mortgage.
Whoever cosigned your loans will be liable for whatever is remaining of your debt — whether it be the entire loan or just a small portion of it.
You’re planning for the future
Even if you’re single with no dependents now, that doesn’t mean you’ll be riding solo forever. You may eventually choose to get married, have kids, or need to take on care for a family member, such as an elderly parent. Once people start depending on you — whether that means splitting the bills, paying for expenses, or covering medical assistance — you’ll need a life insurance policy to make sure they’re protected if you die unexpectedly. And when it comes to life insurance, there is no better time to buy than now.
Why? Because life insurance gets costlier as you age. You can expect that the price you’ll pay for life insurance premiums will increase by 8-10% every year you delay getting coverage, and possibly more when you account for changes in your health. Check out the graphs below to get a sense of how the cost of life insurance coverage increases with age.
Average life insurance rates for women:
| AGE | $500,000 | $750,000 | $1,000,000 |
|---|---|---|---|
| 20 | $21.65 | $29.77 | $35.03 |
| 25 | $21.76 | $29.95 | $35.55 |
| 30 | $23.02 | $31.88 | $37.43 |
| 35 | $25.68 | $35.90 | $42.63 |
| 40 | $33.80 | $48.07 | $52.72 |
| 45 | $47.53 | $68.60 | $86.33 |
| 50 | $71.68 | $104.60 | $132.64 |
| 55 | $108.88 | $159.50 | $209.21 |
| 60 | $192.52 | $283.21 | $361.92 |
Methodology: Sample monthly premium rates based on 20-year term life insurance policy for a non-smoker female in Preferred health rating; quotes based on policies offered by Policygenius in 2020.
Average life insurance rates for men:
| AGE | $500,000 | $750,000 | $1,000,000 |
|---|---|---|---|
| 20 | $28.26 | $39.76 | $47.25 |
| 25 | $27.66 | $38.87 | $46.15 |
| 30 | $28.73 | $40.48 | $48.20 |
| 35 | $30.67 | $43.30 | $52.16 |
| 40 | $41.02 | $58.48 | $72.69 |
| 45 | $60.88 | $88.70 | $113.03 |
| 50 | $94.57 | $138.68 | $176.97 |
| 55 | $153.96 | $225.24 | $289.64 |
| 60 | $266.74 | $390.84 | $504.46 |
Methodology: Sample monthly premium rates based on 20-year term life insurance policy for a non-smoker male in Preferred health rating; quotes based on policies offered by Policygenius in 2020.
Case in point? If you want to lock in affordable premiums to protect your future, you need life insurance coverage now.
You have pets
Our fur babies are family, and you probably want to make sure they’re taken care of if you’re no longer around to do so. And while you technically can’t list your pet as your life insurance beneficiary, you can still leave some of the death benefit to your non-human family members.
Ensuring the care of your pet requires formal arrangements. The first is a legal document stating the designated caretaker of your pet in the form of a will or trust — making certain that your pet is in safe hands after your death. Without this, you can’t guarantee who would take care of your pet after your death.
The second is the necessary funds to provide that care through life insurance coverage that pays out to the designated caretaker or a trust for your pet. Fur children, like human children, have quite a few expenses. You want to make sure that your designated caretaker can afford them — if they can’t, then legally laying out your wishes isn’t enough and still won’t guarantee their protection.
You don’t earn an income
Life insurance is technically an income replacement, but even if you don’t earn an income you need to think about the costs that might be associated with your death. Your contribution to your household or any other support you provide still has economic value, even if it’s not in the form of a pay stub.
You’re a student
If you’re in graduate school, you not only have student loans to consider but also whether any loved ones rely on those loans for bills or everyday expenses. Even if you utilize federal student loans, which are discharged (aka canceled) if you die prematurely, if you’re splitting rent, bills, or childcare with a significant other, they’re now liable for the full costs without the support of your loans.
If you have private student loans that were co-signed by a parent or partner, then as mentioned above, your co-signer becomes liable for your debts. Student loan debt in the United States is 1.53 trillion — and one in four people have it. Leaving loved ones with your debts can place an immense financial burden on their resources and financial security, which can be prevented by life insurance coverage.
You’re temporarily unemployed
If you’re unemployed in the short-term and have dependents, you still need life insurance coverage. Whether you’re dipping into savings now or planning to provide an income in the future, your loved ones will still face the financial impact of your premature death. Life insurance coverage is a long-term risk management tool and getting coverage now — even if you’re unemployed — can help you avoid a coverage gap.
Life insurance companies look at the financial justification for getting coverage, and if you don’t earn an income they might need to see some additional documentation to understand why you need income protection even though you don’t have an income. If you’re in between jobs, most life insurance companies will accept pay stubs from your previous employer.
You’re a stay at home parent
Stay at home parents may not be paying bills, but their contributions to the household allow the breadwinner to. Whether it be childcare or work around the house, stay at home parents provide vital support that would need to be replaced in the event of their death. In fact, a stay at home parent’s economic contribution to the household is the equivalent of earning a salary of $178,201.
If you’re a stay at home parent and die, your family could still suffer financially — even if you weren’t providing the household with an income. The living spouse may have to work less to take over some of your responsibilities, or alternatively, pay someone else to do so, which can seriously end up straining the family’s financial resources.
You’re retired
As you get older, your need for life insurance tends to decrease. Your children grow up and earn their own money, you’ve paid off your mortgage, and you find yourself with less of a need for life insurance coverage. And while the amount of life insurance coverage you need has probably decreased, that doesn’t mean you don’t need life insurance coverage at all.
There are other financial considerations to take into account, even when you’re no longer working and utilize retirement accounts to supplement your lifestyle. Namely, the cost of end of life expenses. Medical bills and the cost of funerals can be exorbitantly high, stretching resources thin for those left behind to pay them. The average funeral can cost anywhere from $8,000 to $10,000 alone.
Even if you’re retired and don’t need a full-fledged million dollar life insurance policy, you should still get some coverage to protect the finances of the people you leave behind. This can be in the form of a final expense life insurance policy, which is a type of permanent life insurance with a generally low coverage amount meant to cover final bills and end of life expenses.
You already have a will and testament
A will and testament is a necessary financial tool for anyone with an estate and assets to protect their heirs after they die — but it’s not necessarily enough. Even with a will in place, you still need life insurance coverage to replace your income if you die suddenly.
This is because a will protects assets you already have — whether that be investments, real estate, or checking and savings accounts. But life insurance protects income you would have anticipated to make and costs you would have covered in the future. Not only that, but your estate is subject to probate and can be collected by creditors before it’s dispersed to your designated beneficiaries. Life insurance, on the other hand, can only be distributed to the people you intended it for (unless they’ve died and are unable to accept the death benefit).
When you’re estate planning, setting up a will and testament and a life insurance policy is the best way to guarantee your family’s financial health after you die.