Perhaps you've heard that life insurance is a financial tool for individuals who have a spouse or dependents who rely on them for income. If that's not you, then you may be wondering, "Do I need life insurance if I'm single?" Depending on your goals and needs, life insurance can be a valuable addition to your overall financial picture. While some single individuals do go without it, there are some compelling scenarios where having a life insurance contract can add to your financial security.
Understanding life insurance
The way life insurance works is that you pay a premium while you're alive. Then, upon your death, your spouse, dependents or other named beneficiaries receive the money from the insurance. Called a death benefit, the money is either distributed in installments or as a single payout. It can be used for end-of-life expenses, to replace your suddenly absent income or to pay down debts and other obligations.
Some life insurance products can be used during your lifetime as well. Options can allow for a buildup of cash value that you can withdraw, or add-on provisions called riders* may let you use the benefit for certain circumstances, such as paying for long-term care if you need it.
How a life insurance contract is structured can also vary. The main types are term life insurance (which only lasts for the number of years you choose) and permanent life insurance (which stays in effect as long as you pay the premium and the contract retains its value). Permanent life insurance often has more options that you can customize to fit your financial goals.
Advantages of buying life insurance when single
Single people sometimes don't have anyone other than themselves who depend on their income, which may lead to thinking life insurance policies aren't necessary. But no one can know what the future may bring when it comes to how you'll ultimately want to handle your final assets and debts.
If you are single and young, one reason you might want to purchase life insurance is that premiums are generally lower when you're younger and in good health. Term life insurance is generally more cost effective than permanent life insurance due to not having cash value. It may be worth considering a
Single people also encompass a wide range of life stages—people who were previously married, people with friends and family who are close yet aren't exactly dependents, and people with children from intricate relationships. No matter what your circumstances are, here are some ways life insurance can benefit a single person:
Cash value growth potential
With certain life insurance products, the premiums you pay go partially toward the insurance for a death benefit and partially toward a potentially growing cash value. You may find that the cash value component of permanent life insurance gives you just as many options as people with spouses or dependents: You can pull the cash to cover expenses, have it be collateral for loans or use it to fund other insurance premiums, such as long-term care insurance.
Post-death debt paydown
If you have loans that have a co-signer or any other debt that would fall to someone else in the event of your death, life insurance can be a valuable tool. Creditors can make a claim on your estate to collect on your outstanding debts. Having a life insurance contract can help cover your debts so that no one else who may have shared responsibility for them has to face it on their own.
Business partner assurances
If you're in business with other people, they aren't your dependents, but your financial life is tied up in theirs. Think about talking to an estate planning attorney about how your death would affect any partnerships you have with other co-owners of your business. Life insurance is one way to help them if suddenly losing your contributions would jeopardize the business.
Taking financial care of others
Single people usually have dependents, independent adult children or friends and family that they care about. A life insurance contract is one way to leave funds to them and let them benefit from the financial boost that could bring. Alternatively, a life insurance contract can pay out to a charity of your choosing, allowing you to leave assets to a cause that matters to you.
Medical care and end-of-life expenses
Some life insurance policies include ways to use some of the benefits for long-term care. Life insurance death benefits can be used toward the end-of-life expenses that are usually settled by the executor of your estate, such as paying for your funeral. Having even a modest life insurance contract can defray those costs.
When your circumstances change
Even if you're currently single with no dependents, you may not always be. People often take on caring for others who come to them needing help, and if you find yourself in this spot, you may decide you want life insurance coverage.
If you do buy a life insurance contract, you'll want to check on it from time to time to make sure it's going to the
Explore your options with a financial advisor
While there are many ways that a single person can benefit from life insurance, the type of life insurance does make a difference. It's a good thing that you're even asking "Do I need life insurance if I'm single?" because it means you're evaluating your options carefully. Talking with a