Do I need life insurance if I'm single?

Make no mistake: Life insurance is a valuable financial tool for individuals who have a spouse or dependents who rely on them for income. But even if you're single, life insurance can help strengthen your overall financial picture, depending on your goals and needs. 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.

This article covers:

• How life insurance works
• The advantages of buying life insurance when single
• Why single parents need life insurance
• Reevaluating life insurance as your circumstances change

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 money from the insurance. This death benefit 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.

If you're the only one who depends on your income, it may be easy to think that 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.

Age can also play an important factor. Regardless of your relationship status, 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 term policy with the option of converting into permanent coverage at some point in the future if life's needs change. Even just looking into it early can give you a more concrete idea about whether life insurance would fit in your projected budget and what the benefit could be down the road.

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 five ways life insurance can benefit a single person:

With certain life insurance products, the premiums you pay go partially toward the insurance for its death benefit and the rest toward its cash value, which has potential to grow. 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, use it as collateral for loans or fund other insurance premiums, such as long-term care insurance.

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.

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.

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.

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.

Life insurance is an important way for single parents to safeguard their children financially. While the death benefit from an insurance policy is critical for sole breadwinners, it's also something you should seriously consider if you receive alimony payments or other outside income. Should something happen to you, your life insurance proceeds can help your child's guardian adequately provide for their needs.

Getting a policy with a sufficient death benefit helps ensure that your child will be able to maintain their lifestyle—whether that means continuing dance classes, attending a private college or going to summer camp. Being able to provide consistency after losing a parent can help ease the transition and lessen the burden on their guardian.

Rather than relying on broad rules of thumb, estimate the annual costs—including child care, groceries and activity fees—that their guardian would incur until the child becomes financially independent. Add to that any deferred expenses they're likely to face, including potential college costs.

A term life insurance policy can be a great solution for parents on a budget since it's the most affordable type of coverage. Alternatively, a permanent policy can work well for parents who desire greater flexibility or longer-term coverage. In addition to protecting your dependents, you may be able to access the cash value from a permanent life insurance contract to manage your own financial needs as they arise.

Often, parents choose to designate a trust as the beneficiary for younger children because minors typically aren't legally eligible to receive insurance proceeds. You can instruct the trustee how you would like them to use the insurance assets, including at what age you want them to pass any remaining funds to your child or children. An estate planning attorney can help you draft a trust that best addresses the unique needs of your family.

Even if you're currently single with no dependents, you may not always be. For instance, your needs can change if you marry someone who already has children. Your new spouse may need additional income if something should happen to you, or you may need to begin financially supporting an aging parent. Any time you experience major life events like these, it's important to reevaluate your needs and make sure your loved ones have the safety net they need.

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 correct beneficiaries. By naming those who will receive life insurance benefits, you ensure that they have access to this valuable asset when they need it. A good plan is to mark a day on your calendar every year to check whether any of your preferred beneficiaries have new information or if you want to make other changes.

Asking yourself whether you need life insurance as a single person means you're thinking ahead and evaluating your options carefully. While life insurance can be particularly helpful for single parents, it's also a tool you may want to consider if you don't have children but support an adult dependent, or just want to build cash value that you can use during your lifetime.

A Thrivent financial advisor can help you decide which type of coverage best meets your needs and how much you should have. They can also work with you to build a comprehensive financial plan that prepares you for retirement and any other life goals you may have.