You're probably acquainted with the concept that life insurance coverage is really a way to protect your loved ones in the case of your untimely death. For those who have a partner or children that depend on your earnings, for example, taking out a life insurance policy can protect them financially when the worst-case scenario happens.
Does that mean men and women who don't have children have no need for life insurance coverage? Not necessarily.
There are a few common scenarios in which life insurance may well be a good fit. Two CERTIFIED FINANCIAL PLANNERTM professionals and a money coach explain how men and women – and their family members – can usually benefit from life insurance.
1. You have student education loans.
Americans owe an average of $35,359 in education loan debt. Depending on in which you visited college and just how many degrees you earned, your education loan debt may even approach six figures. Is the cosigner on the hook to pay off those loans if something became of you?
You may want to think about taking out life insurance in case your parents (or any other family members) paid for the expense of the college education too. “Medical students whose parents are covering the price of tuition, perhaps hoping to be repaid or supported later in life, should think about life insurance,” says Brendan Willmann, a CFP(R) professional at Granada Wealth Management.
The great news: Federal student education loans in many cases are discharged if the borrower dies, the type of mortgage many undergraduate students have. But be aware that for those who have private student education loans, those debts may not be forgiven in the event of your death and could leave your cosigners on the hook for all those loans. However, you shouldn't leave this up to chance. First, find out what transpires with your student loan debt should you die.
If you find that your parents or another person could be responsible for the borrowed funds payments, then it is time for you to consider a term life policy. It offers an inexpensive solution to help protect the type individual who cosigned in your loans financially.
Term life policies offer coverage for any specific duration – the word length – typically for 10, 15, 20 or 3 decades. For those who have student loans, consider buying a term life insurance policy inside a coverage amount that would be enough to pay the balance of the loan, along with a term length that a minimum of lasts before the target repay date of the debt. For example, a 25-year-old woman in excellent health can buy a 10-year, $100,000 Haven Term policy, issued by MassMutual, starting at $7.97 monthly.
2. You have a mortgage.
If you are a single homeowner with a mortgage, you should think about purchasing enough coverage for any sufficient term length considering how much your debt on your mortgage and how many years to the payoff.
This is one of the reasons why Emma Leigh Geiser, an individual finance coach, bought coverage while she was still single. “I purchased my first term life policy after i was single in my early twenties and acquired my first home. My sister and that i actually bought and lived in the property together.”
At that time, Geiser and her sister were both ER nurses – so they knew how fast life could change for the worse. “We knew that if one of us unexpectedly died, the other would struggle to spend the money for mortgage and could be too emotionally wrecked to cope with everything,” she says. “We both took out policies, listed each other as beneficiaries, coupled with enough coverage to pay off the mortgage and supply some extra for time off work or investing.”
If you died throughout the coverage term of the policy, the death benefit could be paid to your beneficiary, who could use it to assist spend the money for mortgage. In case your mortgage includes a cosigner who's also your beneficiary, they could use the death help to assist in paying the mortgage balance. With this approach, the cash you've invested to your mortgage could still benefit someone after you're gone. It's an ongoing act of generosity and love. (You should also produce a living will to make sure your wishes arrived at fruition.)
So for those who have a home loan and wish to provide all your family members with resources to help pay it in the event of your death, choose a policy length that lasts before the loan is projected to be paid off which covers, a minimum of, the full value. For most people, mortgages are a 30-year commitment, so a 30-year term can be a reasonable choice.
3. You've cosigned debts.
Most individuals have some type of car loan or unsecured debt. If you have a cosigner or a partner for auction on these debts, then they'd likely be tied to the bill after you're gone.
Betty Wang, a CERTIFIED FINANCIAL PLANNERTM professional and founding father of BW Financial Planning, doesn't generally suggest that single people with no dependents get life insurance coverage – unless those people have money worries.
“When the only person includes a mortgage, auto loan or credit debt, I ask the client to consider people who will need to deal with his estate,” Wang explained. “Do you would like them to deal with the mess of debt collectors after you die? If they are issues, the client should think about purchasing a life insurance coverage.”
For many men and women, your car loan and credit card didn't need a cosigner should you have had enough credit to qualify for the loan by yourself. However, if you have a cosigner, and do not are able to afford in savings to cover your debt, consider life insurance coverage to safeguard your friend or family member.
4. You've financial dependents who aren't biological children.
Many Americans help financially support aging parents, grandparents or perhaps children within their family who aren't biologically theirs. If you have any family members who depend on you financially, you might want to consider life insurance. If you've named them as your beneficiaries, the insurance policy payout could help them purchase things like health care and living expenses if you were no longer around.
Deciding what the right amount of coverage is in these situations could be a bit more complicated. And, most life insurance calculators don't offer choices for aging members of the family in particular. For kids inside your family, it is rather simple. Input information in the online life insurance calculator as though the kid is your own.
For elderly relatives, here is a helpful hack: place in their information as though they're your partner and list them as no longer working. If they have debts, include those. This would provide you with an idea of how much of a nest egg they may need to be financially protected should you be no more around to assist.
Having a full time income will with directives is also imperative in this case, so you will want to consult with a lawyer.
5. You have partners.
If you intend to start a small business and grow your company through small company loans, for instance, you may be have to life insurance first. “Insurance will probably be required for securing a business loan,” Willman explains. You'll also have to list your lender among the beneficiaries on your life insurance coverage, to help ensure your loan will be repaid even in the situation of your death.
If you've started a company having a partner, your untimely death could financially challenge your enterprise. Not only would they be without your skills and vision, but your death may also hurt the financial structure of the business.
Life insurance policy could smooth things out and purchase your lover some time to decide which are best for the way forward for your company. With that in mind, it's also wise to produce a arrange for the organization if each of you were no longer around. Find out how much cash would be needed to overcome the challenges that a partner's death would create.
If your company is cash poor or in debt, that is typical for many startups, term life coverage could present an affordable method to provide funds to your business in the event of your death, and is a vital part of your business contingency plans. Be sure you consider business debts, especially if you have personal property as collateral. For details, consult an attorney who's familiar with the company partnership rules in your state.
6. You want to cover end-of-life expenses.
Funeral expenses cost $7,000 to $10,000 on average. When compared with mortgages, small business, and student debt, this isn't much. Still, many people prefer to know these expenses are looked after so that their mourning family and friends won't need to contribute financially to pay off these charges. Often, life insurance coverage using your employer is enough to cover final expenses, just like a burial or funeral insurance plan, plus they usually offer coverage options of 1 or two times your annual salary.
But, there are more end-of-life expenses to take into account. It's no fun to think about, particularly when you're young and healthy, but a terminal illness that requires hospice care or results in intensive care at a hospital might be costly – sometimes as much as $10,000 each day.
In these scenarios, an individual term life policy outside of work can offer affordable, additional coverage and, ultimately, peace of mind. A policy during these situations can help your survivors to keep in mind you and also mourn your death rather than worrying about necessity.
7. You need to leave a legacy.
Most people want to make an impact around the world, be it through our families, within our day-to-day interactions with other people, or something like that that can help those less fortunate even after we're gone. The proceeds of a life insurance coverage might help function as a financial legacy to people you depart behind.
For example, if you've ever thought about establishing a scholarship fund or creating a sizable contribution to some personally-meaningful charity, you'll need to plan ahead. Life insurance can serve as a backup for this planning if the unexpected occur.
Whether life insurance is worth it depends upon your situation
Single or not, chances are that you may identify with a minumum of one of the situations above that. And if you're still unsure about your requirement for coverage, a web-based life insurance calculator can offer a free assessment of the needs. (And, yes, it'll even tell you if you might not require a policy whatsoever.)
Life has a way of changing. Fast. If you're currently single, financially secure and debt-free, term life insurance probably doesn't need to be your radar right now. By comprehending the scenarios that will necessitate coverage, you'll be better ready for whatever comes next. It is a great feeling.