Three times you think you don’t need life insurance (but actually do)

Life insurance coverage offers protection even when you don’t think you need it.

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Andrew HurstSenior Editor & Licensed Auto Insurance ExpertAndrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

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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When people rely on you financially, a life insurance policy is necessary to protect them from financial hardship if you die. But if you’re single and have no dependents you may need life insurance coverage, too.

Life insurance coverage isn’t just important for married couples with kids — it’s a necessary risk management tool for people in various stages of life. Here are a few situations when you might need life insurance, even if you don’t realize you do.

Life insurance terms you should know
  • Beneficiaries: The people you name on your life insurance policy to receive the lump sum of money — also known as the death benefit — when you die.

  • Cash value: The portion of a permanent life insurance policy’s monetary value that grows tax-deferred over the life of the policy.

  • Death benefit: The amount of money the life insurance company will pay your beneficiaries when you die.

  • Face amount: The dollar amount, or death benefit, your beneficiaries receive if you die while your life insurance policy is active.

  • Insured: The person who is covered by the insurance policy.

  • Policy: The legal document that includes the terms and conditions of your life insurance contract.

  • Policyholder: The person who owns an insurance policy. Usually, this is the same person as the insured.

  • Permanent life insurance: A type of life insurance that lasts for the rest of your life and usually includes a cash value account.

  • Premium: The amount you pay your insurance company to keep your coverage active. Premiums are typically paid monthly or annually.

  • Riders: Add-ons to a life insurance policy that provide more robust coverage, sometimes for an extra cost.

  • Term life insurance: A life insurance policy that lasts for a set number of years before it expires. If you die before the term is up, your beneficiaries receive a death benefit.

  • Underwriting: The process where an insurance company evaluates the risk of insuring you and determines your final rate.

You don’t have dependents

Just because no one relies on you for an income doesn’t mean that your family won’t be financially impacted by your death. There are a few instances where life insurance can protect them: 

  • 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. If you’re planning on having a family, you should get coverage ASAP because it’ll be more expensive later — life insurance premiums increase by 4.5% to 9% every year you age.

  • You have co-signers on a loan. If you die and have any co-signed loans, such as a private student loan for graduate school or a mortgage, your co-signers will become responsible for your debts.

  • You have pets. While you technically can’t list your pet as your life insurance beneficiary, you can still leave some of the death benefit for the care of your non-human family members.

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 paycheck. You still need life insurance if:

  • You’re a student. Graduate students with private student loans that were co-signed by a parent or partner need insurance so that their co-signers don’t become liable for those loans if they die. Even if you utilize federal student loans, which are canceled if you die before paying them off, 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.

  • You’re a stay-at-home parent. Stay-at-home parents may not be paying bills, but their contributions to the household still need to be factored in. Whether it be childcare or work around the house, stay-at-home parents provide vital support that would need to be replaced if they died.

  • You’re retired. Medical bills and the cost of funerals are exorbitantly high, stretching resources thin for those left behind to pay them. The average funeral costs upwards of $7,000. Even if you’re retired and don’t need a million-dollar life insurance policy, you should still get some coverage to protect the finances of the people you leave behind.

You already have a will 

Anyone with an estate and assets should have a will drawn up to protect their heirs after they die — but that isn’t enough. Even with a will in place, you still need life insurance coverage to replace your income if you die suddenly, because a will protects assets you already have — whether that be investments, real estate, or checking and savings accounts. 

Life insurance protects income you would have anticipated making 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 listed as your beneficiaries. 

When you’re estate planning, setting up a will and a life insurance policy is the best way to guarantee your family’s financial health after you die.

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Author

Andrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

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.

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