The Complete Guide to Who Really Needs Life Insurance
Posted on: 14 April 2017 by Yasmine Carr
Studies show that only half of millennials currently have life insurance. Is this too few? Too many? Who benefits from it? Find out here.
Life insurance is designed to make sure that your family and other people who depend on you for financial support will be okay, in the event of your premature death.
Most people struggle deciding whether they need a life insurance policy or not.
The simple rule of thumb is that if anyone will suffer financially when you die, then you should be covered.
Kristen Komer, vice president at MetLife says that life insurance can work even if you don't have dependents but want an additional source of cash.
Life insurance can cover a wide variety of needs.
In fact, a research that was conducted by the non-profit group Life Happens found that 63% of Americans consider life insurance a necessity.
If you decide to purchase a life insurance policy, you should know why you are buying it and the right type of policy to buy.
Do I need life insurance if I have no dependents?
Most people will say "No, you don't need life insurance if you have no dependents".
Contrary to this, there are instances where you'll need to be covered even if you don't have dependents. For example, you may need a life insurance to cover your funeral expenses and certain debt obligations.
Or perhaps, you love charity. Life insurance can help you leave a legacy.
When is the best time to buy life insurance?
The life stage at which you should buy life insurance depend on three factors:
- The type of insurance you want
- Your individual situation
- Why you want the life insurance
That being said, it is important to also note that the younger and healthier you are, the cheaper the rates.
Who needs life insurance?
The truth is most people need life insurance. Here is a quick guide to who really need to be covered.
1. Young single adults
One of the main reason why single adults buy life insurance is to be able to pay off their funeral costs. However, this is not the only reason why a single adult needs to be covered.
A lot of single adults take care of their parents financially.
A life insurance can ensure that even after you die, your parents will continue to get ample financial support.
Even with the retirement income, retirees may still need life insurance as a way to protect their heirs.
Retirees may also need a life insurance for estate equalization. For example, if your son inherits land, your daughter can get an equivalent measure of the value of that land from the policy.
3. Business owners
As a business owner, buying a permanent life insurance policy can help you borrow a business loan against the policy's cash value.
Business owners can also use life insurance to pay off business debts, fund a buy-sell agreement, or even fund a retirement plan for employees.
If you have a mortgage, life insurance can ensure that your debts are paid off even when you are gone.
If you die without a good insurance cover to pay off your debts, everything you worked so hard to acquire may be lost.
You may end up leaving your estate with debt, which could be passed to your heirs.
5. Parent of a special-needs child
If you have a child who needs special care, you'll want a policy that can provide them with the standard of living they are accustomed to when you die.
Life insurance can ensure the child will have all the financial support they need.
Life insurance can provide a 'replacement income' so your family can continue to pay everyday expenses.
A term life policy is the most suited for breadwinners as it can cover all their working years.
Before buying life insurance, you should first consult your financial advisor for advice on the right policy type.
Your financial advisor can also guide you on the best life insurance rates as well as other affordable saving options.