The prudent see danger and take refuge, but the simple keep going and pay the penalty. – Proverbs 22:3
About 37 million U.S. households have no life insurance, according to industry trade group LIMRA. For many, the cost of coverage stands in the way. But there may be some, such as singles and married couples with no kids, who don’t have insurance because they think they don’t need it.
How to Know Whether You Need Life Insurance
The easiest way to determine whether you need life insurance is to consider whether anyone would suffer financially if you died. You may not need life insurance if you’re married, both you and your spouse are working full-time, and neither of you have children from a previous marriage. If one of you died today, the other may be able to handle his or her financial obligations.
Still, there are some reasons why a single person or a couple with no kids should consider buying life insurance.
If you don’t have much money in savings. You may want enough life insurance to cover funeral and other final expenses.
If you want to protect against the possibility that you or your spouse could become medically uninsurable in the future. If you developed some type of illness while you did not have life insurance, you may not be able to get a policy. Buying a policy while you’re healthy guards against that scenario.
If you want to lock in the lowest rates. Premiums for life insurance will typically go up as you get older. Buy a policy now, and you’ll lock in the lower cost.
If you have financial obligations that require both of your incomes. I don’t recommend buying a house that requires two incomes (Read How Much Should I Spend on a House?), but if you’re in that situation, you may want to have enough life insurance to be able to pay off the mortgage or pay it down so it could be refinanced and afforded by the surviving spouse.
Credit card debt held in one spouse’s name does not necessarily absolve the other from the responsibility for that debt. In a community property state, a spouse’s debts incurred after getting married may be the responsibility of the other spouse as well; state laws vary.
In states not governed by community property law, many creditors will write off the debts of a deceased person when he or she held the debt in his or her name only, but not always. In some states, if the debt was accrued through purchases of items that benefited the family, a surviving spouse may be held responsible for those debts.
If you have student loans. Check the terms of your loan. It’s possible that the loan would be discharged upon your death. However, if you live in a community property state and you took out the loan after getting married, your spouse may be liable for the debt upon your death. And if someone co-signed your loan (something I encourage people to avoid), your co-signer will probably be responsible for the debt upon your death.
Again, if someone else would suffer financially from your death, carrying life insurance would be the responsible thing to do.
Once you have children, the question quickly shifts from “Do we need life insurance?” to “How much life insurance do we need?”
If you are single or married without children, do have life insurance? Why or why not?
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