Why Single People Need Life Insurance TooDespite some common misconceptions, life insurance isn't just for those of us who are married with children. If you're a single, you can benefit from it, too, because being unmarried doesn't necessarily mean being alone: In all likelihood, your death would have a financial impact on others.

"Some think that if you're single and don't have a spouse or children, then there's no need for life insurance," says Todd Laszewski, director of life product development at Northwestern Mutual.

Then too, there's the bravado of youth. "There is a feeling of invincibility: Young, single people are generally healthy and likely not concerned about the risk of an untimely death," he says. "They simply don't consider that there is a need, and in a fact, a long-term benefit, to considering how life insurance fits into their financial security planning early on."

"Life insurance for a single person doesn't always make sense," points out Michael Wall, president of Wall Financial Group, "but sometimes it's a perfect fit." Who needs it, and how much, for the most part comes down to the goals of the person.

Vicki Brackens, a senior financial planner with Brackens Financial Solutions Network and MetLife, (MET) thinks that only a tiny percentage of the single population really needs no life insurance at all. "It could be that rare person who is not attached to anyone or anything, and they don't care about their legacy," says Brackens, but for a variety of reasons, it's a good tool for everyone else.

Your Life Won't Always Be Like This


For starters, consider your "end of life expenses." Who is going to pick up the remaining tab for your debts, mortgage, funeral, car and other responsibilities?

Next, ponder your legacy. "Life insurance can be a great way to leave a tax-free legacy to nieces, nephews or anyone else," says Wall. That list also includes your favorite charity. "You could buy a single policy that would pay a lump sum to the organization or have the policy paid to a trust and create an income stream for as long as you desired," he adds.

Know too, that life insurance purchased today can protect your future insurability. When you're young and healthy, not only is life insurance cheaper, but getting a policy early in life eliminates the risk that later health issues will make you uninsurable, or saddle you with premiums that would send you to the poor house, points out Frank Darras, a lawyer with DarrasLaw, which specializes in insurance. You're also not likely to be single forever: Buy a policy now, and you can just build on your existing coverage once you're married, instead of starting from scratch when you're older and initiating coverage will be more expensive.

A Smart Investment for Yourself, Too


Depending on the type of life insurance you buy, a policy can also be a forced savings vehicle, notes Byron Udell, CEO of AccuQuote, which offers online life insurance quotes and information.
"I have owned a $500,000 whole life plan for the past 20 years. If I were to cash it today, I would have earned over 4% per year cumulatively, on every dollar I put into it -- not to mention the fact that if I had become disabled, the insurance company would have paid my premiums for me and I'd still have all that cash available to me. Further, my beneficiaries would receive over $500,000 tax free, if I passed away."

There's another way to make use of a life insurance policy. "I make too much income to qualify for a Roth IRA," says Tony Keena, who is single and a partner with the Estate & Business Planning Group. " By using a cash value life insurance policy, I can redirect those dollars that I would like to contribute towards a Roth to my life insurance policy. This allows me the same tax deferred accumulation of dollars [inside of the policy]."

"When I decide to take the monies out, I can do so tax free [just like the Roth IRA]. So by using this strategy, one can put away dollars that can later be taken out tax free and they do not have income limitations imposed on them," he adds.

Let's Go Shopping

If all this talk is starting to make you think that life insurance might be for you, investigate. A good place to begin is the nonprofit Life and Health Insurance Foundation for America . Take special note of their publication What You Need to Know About Life Insurance. Generally, term insurance covers you for a specified period, determined by you, and whole life (also called cash value or permanent insurance) covers you your entire life, has a savings component and you can borrow from the policy.
"I bought my first cash-value life insurance policy almost 20 years ago," says Pamela Yellen author of Bank on Yourself: The Life-Changing Secret to Growing and Protecting Your Financial Future. "I was reluctant to buy it since I was single and had no children, but it made sense after an insurance agent explained the guaranteed savings component and ability to access cash whenever I want. It turned out to be the best financial decision I ever made, and the policy has beaten my stock and real estate investments handily -- without the sleepless nights."

There's a lot to learn, and one size doesn't fit all. So do seek a financial adviser for guidance.

While you don't want to pass up a free coverage offered by your employer, supplementing that with a policy on your own is often a good idea. "Unlike your employer's policy, which is not portable, your protection goes with you wherever you go, even if you change jobs," says Laszewski.

You'll want to choose an insurer that has financial moxie. "You don't want the insurance company to 'die' before you do," says Udell. "A life insurance policy is a 'promise to pay' by an insurance company and you want them to be there in the future to pay your claim."

Pick a company with top financial strength ratings that has demonstrated stability over time, advises Kirk Okumura, adjunct professor of financial planning at The American College, which provides education for financial services professionals. "Only buy from companies that are highly rated by agencies like AM Best [A++ is the highest rating] and Standard & Poors [AAA is the highest rating]," he says.

Considering Cost


The big question though, is how much will all this coverage cost? According to Bryan Pendrik, senior planner with TSG Financial, the factors that determine the premium you'll pay include:
  • Your health (naturally, the healthiest people pay the lowest rates);
  • Smoking (it adds 30% to 40% to a policy's cost -- good financial incentive to quit);
  • Family history;
  • Age (the younger you are when you open a policy, the better);
  • Your state; and
  • Your gender (women pay less than men)
Greg Blake, executive director of life insurance products for USAA, adds a few more items to that list: A risky occupation or hobbies may lead to higher premiums, or exclusions if an accidental death occurs. And Vicki Brackens reminds us that where you travel and how often, your driving record and your credit rating can have an impact too.

Still, while low premium rates may seem appealing on the surface, they shouldn't be the chief criteria for choosing your policy.

"Low rates can come at high cost, and it is critical to understand the difference between price and cost," says Laszewski of Northwestern Mutual. The price of life insurance is the premium that you pay for your policy. But the ultimate cost takes into account not just the premium, but other factors as well. For instance, does the company pay dividends? Those will, in essence, lower your premiums over time. With permanent life insurance, you should take into account the cash value that builds up over the long term, and the fact that the protection will be in place for your entire lifetime. "These aspects add significant value to the policy and reduce the true 'cost' to the policy owner," he says. As with everything, shop around.

Whatever you do, take action. "Don't be afraid to have a conversation about life insurance -- it doesn't mean you're causing your impending death," says Brackens.

Udell of AccuQuote sums it up nicely: "Life insurance is at the foundation of the financial planning pyramid. Bad things happen. And when they do, life insurance is the only product that provides the right solution for that moment in time. Your chances of dying are one out of one. It's just a matter of when."

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Thomas Rockford

The purpose of life insurance is normally to protect your dependents in the event of your death. If you're single, since you don't have any dependents, I would say you don't need life insurance.

However, you may choose to buy life insurance now on the basis that you hope to have dependents in the future, and depending on your circumstances at the time it may be more expensive to buy life insurance then than it is now (for example if you are diagnosed with something like Type II diabetes or heart disease in the interim).

You can also buy life insurance as an investment though I would advise against it; if you are dead set on getting life insurance, there are some great rates at LifeAnt.com.

January 24 2014 at 7:20 PM Report abuse rate up rate down Reply
SingleSkeptic

This makes NO sense. A single person's debt is NOT the surviving family's responsibility--personal debt entered into without a cosigner cannot be attributed to survivors. So I'm not saving anyone from paying my debts--they wouldn't have to anyway. Property debt goes to who inherits the property. If the home is upside down on the mortgage, it would be foreclosed on at my death. If it isn't, and I leave someone my home, they'd have to make the mortgage payments--or sell the house and take the equity. Charities can do this too. Most of the time your heirs didn't need your house if you are single without dependents... my parents and siblings have their own homes and lives elsewhere. If they do want to keep the house, they can pay the mortgage payments. Either way they get the equity I accumulated. They do not owe anything for any of my consumer debt or even student loan debt unless they cosigned for it. Funeral expenses are the first expenses paid from your estate when you die--so if you have anything at all, it should not cost your family anything, and if you don't have anything, you probably can't afford life insurance! If you want your heirs to get more than what you have, this is one way to do it, but it isn't a 'must' for any reason I could find in the article.

If I had a spouse or dependents, it would be essential to carry life insurance, as is disability insurance. I think disability insurance is more important for singles because we have to provide for ourselves while we live.

I see no reason to have life insurance when single for the reasons stated in the article, as the assertion that the family is liable for your debt is patently false. It's not a 'noble gift' as someone states below--it's a relatively poor investment choice for most singles. If you intend to marry, and want it while younger for a lower rate, great--but unless someone is dependent on you and your estate for their future after you are gone, it cannot be called a necessity.

July 16 2012 at 7:18 PM Report abuse rate up rate down Reply
RetirementIsMyDream

As the article states, life insurance is not for everyone. I am the perfect example of a person that does not need life insurance (for security that is...the question of investment is a different idea altogether which I will not address here).

I am 40 and single with no desire to ever marry again. I have no children, and no uterus, so therefor will never have children. I have a mortgage, car payment, and student loans, but no other consumer debt. The reason that I don't need life insurance is simple: my bank accounts, my 401k, and my mortgage are in my trust, my will is up to date and linked to my trust, and I have enough money in the trust to put me in the ground and cover all of my debt (and then some). Because everything is in my trust, there is no probate and my trustees will be able to get to the funds quickly and take care of all expenses. So fiscally, everything is covered. No need for insurance. My funeral is also already planned, and will be low cost since I am a veteran.

Meanwhile, my siblings all have families of their own (spouses and children) so I have no reason to think that I will be inheriting any life insurance money from them - of course not: their spouse/children will get everything (as it should be)....so why should I provide for them when I am gone? I have enough to pay my own way thru life, and to take care of everything once I'm dead. Extra money would certainly help my siblings, but I don't see that as my responsibility or even my moral obligation given that it will not be recipricated. So even emotionally and morally, no need for life insurance.

If I sound callous or bitter, then I guess that's ok too. Just trying to make my point that there are some people in the world who don't need life insurance.

June 07 2011 at 10:19 AM Report abuse rate up rate down Reply
aisha200bc

The One's who are Single must Promote the Life Insurance-- Thats the Most Beautiful thing that one can do---- You might live Alone But when you Leave Only Think --- How many Smiles and Sound Hearts you may Leave Behind--- A life Without a Cause is No life-- And Those Who can make a Difference after leaving this Life With Good Memories --- Hats Off for them --- Its the beauty of the Spirit that matters--- Dont give it a second Thought --- Go for it--- Unconditionally------

June 07 2011 at 3:10 AM Report abuse rate up rate down Reply
maxhamlin10

The idea behind life insurance is simple. It is a relatively inexpensive way to protect any current debt you might have against becoming a burden on family members. Some students loans can be forgiven if the decesased owed on them, but otherwise it is a great way to have your health locked in with your age to a small term policy. Then when there is an opportunity for the single person (opportunity either by way of income growth or marriage/kids), the insured often times does not have to repeat the medical process. And the idea of permanent whole life insurance is simple: It is guaranteed never to go down, the only thing over the last twenty years that has outperformed whole life with a certain AAA rated company is common stocks (10.08% v 8.24% with LI) but stocks are volatile and majority of people pull out before reaping any great benefit. Also, people should be saving 5% of their gross income into a combination of taxable, tax deferred and tax free accounts. And if you know anything about those, you know that LI is only one of those (tax free) so a great planner will encourage you to have the emergency fund, get the free money from your employers matched 401k and do whole life insurance.

June 02 2011 at 10:11 AM Report abuse rate up rate down Reply
kittfurry

I work for an insurance company and felt similar to some of you before I started. Now I see the value in it. The insurance is not for you, it's for whomever is surviving you. If your wife stays at home a watches the kids and you are the primary breadwinner, how will she support them while she looks for a job? Especially in this job market, where it could takes months or even years to find something. The mortagage still needs to be paid, groceries still need to be purchased. If your husband is the primary breadwinner and you take care of the kids, when you pass, won't the children need care? Can you afford the extra expense of childcare these days? There are alot of reasons to buy life insurance. Cash value is an added bonus of whole life insurance that can be used to borrow cash in a time of need. Also, why does NO ONE ever complain about Auto insurance? Do you get your premiums back if you don't have an accident? Or what about homeowners insurance? Does the insurance company pay back your premiums if you never have the need to use it? NO! So why is this any different? Insurance in general is always to protect the WHAT IF? Whole life is probably the ONE type of insurance that protects an indisputable definite: YOU WILL DIE, and you should have some sort of plan in place for that. And to quickly address the point of agents selling no matter what: they must prove the need, or else an underwriter will not approve the policy. A 25 year old with no family who rents an apartment can't get $2M in insurance just because he can afford it. The benefit must protect your needs, not make you a profit. I'd encourage everyone to sit with a licensed rep from a reputable company. Look into mutual companies, that give profits back to policy holders in the form of dividends. Most all will sit with you at no charge, and you may learn something! Just give it a shot before you judge so harshly.

June 02 2011 at 10:03 AM Report abuse rate up rate down Reply
MRich

Look it is really simple, if you want to have an actual financial plan you need to leave your emotion at the door. The armchair planners that read Money Magazine (porn of the finance world) and listen to Gordon Ramsey crack me up. Life insurance, term vs. whole, mutual funds, ETFs, disability insurance, IRAs or any other financial vehicle are neither inherently good or bad - they are just applied properly or improperly. There is no "belief" in one vehicle or another, you’re not choosing a religion - it is just math.

As it applies to the classic term vs whole - on a tax and risk adjusted basis it is very difficult to buy term, invest the difference and come out ahead. That is not a belief, it is pure math. If you need more return and are willing to take the associated risk then by all means whole life is not for you.

The bottom line is that every persons individual planning needs are different, what is not a good fit for you could be a good fit for others. All this article is doing is pointing out planning techniques that some may have not considered, it is not an assertion that said techniques are right for you personally. Further, if you have not immersed yours self in current planning techniques then it is very unlikely that you have considered all the pros and cons of strategies such as this article outlines. Consult a financial professional. If you are being "sold" a vehicle that you don’t understand, you have a bad advisor - get a new one.

June 02 2011 at 10:03 AM Report abuse +1 rate up rate down Reply
MRich

q

June 02 2011 at 9:31 AM Report abuse rate up rate down Reply
Ed_B

Gee. Insurance companies and insurance brokers recommend buying their products. Who would have thought? :-/

May 25 2011 at 8:45 PM Report abuse rate up rate down Reply
Battle Chaser

Wow. Just about all the commenters here did not like this article at all. I guess I am one of the few ones that actually found this article educational. While I don't agree with everything that was said in the article, most of it rings true.

Let me start off by saying that I am single, 33 years of age, and have a whole life insurance policy. I am surprised at how many people felt so upset as if the article was forcing them to buy a life insurance policy. And please, let's be clear that we are talking about life insurance here and not any other insurances such as car or house insurance as a few people have commented on. The article is merely pointing out the potential benefits of owning a life insurance. If you don't need it, then great! For some of us, it's worth considering. Did most of you read the following paragraph from the article?

“Life insurance for a single person doesn’t always make sense,” points out Michael Wall, president of Wall Financial Group, “but sometimes it’s a perfect fit.” Who needs it, and how much, for the most part comes down to the goals of the person.

The paragraph above clearly states that life insurance is not for every single person. I'm a 33-year-old single male with no children. From what everyone is saying here, I shouldn't own a life insurance, but I do because of my goals. The first of which is that it affords me a degree of peace of mind knowing that my family (mom and siblings) will be getting benefits at the event of my departure. We are able to pay our bills timely but we are by no means financially well-off. My family receiving my 250k policy would be a great deal of help.

The second reason for my life insurance is the security for my future family. Like the article mentioned, just because I'm single now, it doesn't mean I'll stay single forever. My plan is to have a family by the age of 40 and by that time, I would be finished with my insurance premiums. I know that once I have my own family, freeing up money for life insurance premiums will be more difficult. I also pay a discounted premium by purchasing my policy at a younger age. I purchased my policy at age 30, paying $140 a month, for 10 years. It's not really breaking the bank for me. Someone could just easily spend that on cigarettes or dining out. And if I do decide I need a bigger policy, I will just purchase a term policy then to supplement my already existing whole life policy.

Lastly, I can borrow from my policy in case of an emergency. The investment portion of the policy was actually a tiny reason why I got it. I got it mostly because of security. The growing investment I viewed as just an additional benefit. If down the line, I happen to become financially independent and/or have no more need for the policy, it's nice to know that I can always cash out. I don't think anyone should consider life insurances as investments first, but having it's value grow while providing some security for the time being, is always good.

May 25 2011 at 7:50 PM Report abuse rate up rate down Reply