If you own or lease a car, the state you live in (most likely) requires you to carry car insurance. And if you’re like 77% of drivers in the U.S., you’ve experienced why car insurance is necessary… because accidents happen.
The same goes for life insurance. Most people don’t get life insurance simply because it’s a nice thing to have. They get it because, unfortunately, accidents (and death) happen.
Many young and middle-aged adults wonder, “Do I really need life insurance at this point in my life?”
If you’re asking yourself that question, the answer is yes.
Who needs life insurance?
Before we discuss who needs life insurance, it’s important to understand the general premise of life insurance. While the purpose of most other types of insurance policies is to make sure you are covered if something bad occurs, traditional life insurance is a little bit different. When it comes to life insurance policies, the main goal is to make sure your family (i.e. the people who depend on you financially) is taken care of once you’re gone.
Why Life Insurance Is Important for Everyone to Consider
One of the many benefits of life insurance is the promise of a lump sum payment. In fact, most people seek out a policy to protect their designated beneficiaries after the worst-case scenario: the policy holder’s death. This means that anyone depending on the policyholder – a spouse, children, or elderly parents – is guaranteed some level of financial security.
Life insurance isn’t only for people with dependents, however. Single adults with no dependents can also benefit from life insurance. Certain types of life insurance policies make owning a policy a great investment for people of all ages at any stage in their life.
To help illustrate this, we’ve laid out three different types of “candidates” for life insurance and explain how coverage can make an immeasurable impact on the people they might leave behind.
Life Insurance Is Good for Families
Our first candidate for life insurance is a 42-year-old man with two minor children and a homemaker spouse. You might say this type of policyholder is a quintessential case for life insurance. If this family was faced with the worst-case scenario, his spouse would suddenly find themselves with no income, two dependent children, and immense financial burdens during the worst time in their life.
However, if this man had a $500,000 or $1,000,000 life insurance policy, it’s likely that his family would be financially set for several years, giving his spouse ample time to get back into the workforce.
This is just one example, as there are many variations to this type of situation. You might be a single parent with children or maybe both you and your partner have no dependents and steady incomes – either way, the death benefit your family would receive gives them time to grieve and adjust without worrying about finances.
Life Insurance is Good if You’re Nearing Retirement or Retired
Our second candidate for life insurance is a 72-year-old woman who is retired. She and her husband have paid off their home. Their kids are fully grown and have kids of their own. It would not appear that life insurance is necessary since she has no dependents – but what about her spouse?
In fact, both spouses in this scenario would benefit from having life insurance. There is no telling how long someone will live into retirement, using up vital savings, or what will happen in older age. For example, if this woman died and her husband suddenly developed a condition that required advanced around-the-clock care, how would he afford such treatment on just social security and whatever retirement savings were left?
Because of concerns like this, older individuals should also consider life insurance. It’s important to keep in mind, however, that older policyholders do pay more for premiums, as their policies present a significant amount of higher risk for the insurer.
Life Insurance for Younger Single Adults
Our final life insurance candidate is a young woman in her late twenties who is unmarried and has no children. Should she shoulder the additional expense of carrying a life insurance policy if she doesn’t have any dependents?
The simple answer is yes. Even though she may not need a million-dollar policy, carrying a small policy to defray the cost of her burial expenses and debt would be greatly beneficial to those she’d leave behind.
End-of-life expenses can cost up to $20,000, which can be a huge burden on those left responsible. When it comes to debt, collectors don’t stop collecting – even after death. It’s common for debt agencies to harass the debtor’s parents, siblings, or other family members until the debt is finally paid. Even a minimal life insurance policy would help cover these expenses.
How much life insurance coverage do I need?
As illustrated above, the need for life insurance applies to a wide range of people and circumstances. Which is why – instead of asking whether you need life insurance – the question you should ask yourself is how much life insurance do you need?
In general, the amount of coverage you need depends on your lifestyle and age. Someone with a family (spouse and/or children) needs to consider factors such as their debt, mortgage, income, and future education expenses for their children. In this situation, it’s recommended to take your annual income and multiply it by 10 – 15x. On the other hand, a young, single person with no dependents may not need that much life insurance. Instead, they could opt for a much smaller policy that is more affordable and only covers final expenses and debts.
Life Insurance Is for Everyone
Everyone needs life insurance at some point in their life. Life insurance is primarily about providing for the care of your dependents if you die unexpectedly. But even if you don’t have dependents, it can help those who have claimed (or still claim) you as a dependent with the costs of your final arrangements. Moreover, life insurance can also double as a financial planning tool while you are still alive.
Ultimately, the biggest benefit of life insurance is the security it provides your family. If you are ready to invest in a life insurance policy or just want to learn more about how life insurance works, call one of our brokers at Principled Life today. There’s a policy for every situation and condition, and we can help you find an affordable policy that fits your life.
