Do you need life insurance if you don’t have dependents?
This seems like easy questions to answer, but each situation is actually specific to the person asking it. The first thing we need to do is explain that life insurance exists for the benefit of your survivors. Does that mean you shouldn’t buy life insurance if you are single, healthy, and don’t have anyone who relies on your income? Not exactly. Let’s first explain the two most common types of life insurance (term and whole life), then explain who they are best for. Then we can walk through some situations and explain who needs life insurance, and why.
Term and Whole Life Insurance – Who Benefits?
The two most common types of life insurance are term and whole life insurance. Term life is generally less expensive per month, and last for a set duration of time – often good for 10, 20, and 30 year policies. During this time, your premiums will never increase. At the end of the policy, you can often renew it, though probably for higher rates, since you will be older at the end of the next term. Whole life insurance is a lifetime policy, but it usually comes with more expensive monthly premiums.
First, let’s simplify this discussion and eliminate whole life insurance from the options. For most people without financial dependents, term life insurance is going to be the best option. Whole life insurance may be a good option for people with complex estate plans or who want to establish a trust with their life insurance policy, but if you don’t have dependents, you probably don’t have those issues. The second thing to remember is that life insurance is there to protect a source of income, not act as an investment. According to this article on HuffingtonPost, Life Insurance 101, you should keep your insurance and investments separate.
Now that we are on the same page, let’s look deeper at this topic.
Who needs life insurance
Buying a term life insurance policy when you are young may be a good idea. The benefits to buying a term life policy when you are young is that you can usually lock in lower rates because life insurance rates take many factors into consideration, including age, health, etc. Buying life insurance, as well as disability or long term care insurance, while you are young means you are probably the healthiest you will be in the next 30 years. And the best, and least expensive time to buy insurance is when you aren’t as likely to need it right away.
You should buy life insurance when:
- People rely on your income (spouse, children, parents, other dependents, etc.)
- You have debt (mortgage, business loan, consumer loans, etc.)
- Your estate is complex
- You are a business owner with a partner or other vested parties
- Any of these items may apply to you in the future
Who can skip life insurance
Life insurance is actually good for virtually everyone, even if they don’t meet the criteria listed above. Even if no one is relying on your income now and you don’t have any dependents, that could change in the future. You could, for example, get married and have children, have to offer financial assistance to your parents, or open a joint business venture.
One of the main benefits of buying life insurance now is that you are buying into a life insurance policy while you are young, healthy, and able to do so. Locking into a policy now ensures you are insurable and that you have a policy should you need one in the future. It is possible to become ill or have some other health problem that makes you uninsurable, or causes your premiums to be prohibitively expensive. I know you think it might not happen to you, but don’t take my word for it. The folks at GenWorth have put together these life insurance stats to help you get a better idea of why you need life insurance.
So the answer to who can skip life insurance is anyone who wants to gamble on their family’s financial future.
