It's easy to think of life insurance as something for parents and married couples, but do single people need life insurance as well? Just like anyone else, the answer depends on your financial goals and situation.
The coverage life insurance provides can help you support those who depend on your income directly or indirectly. You might not even realize how people close to you could be financially impacted if you passed on prematurely. Here are a few scenarios where life insurance for single people can help loved ones and others who rely on your well-being.
Paying Funeral Expenses
Most of us don't like thinking about dying unexpectedly. But if it did happen, the cost of the funeral itself could be a significant financial strain on your family. The average expense for a traditional ceremony is more than $7,000, according to the National Funeral Directors Association.
Rather than leave your parents or siblings in the lurch, you might consider taking out even a small life insurance policy that can help with your final expenses. For example, a term policy provides coverage for a set period of time and can cost less than whole life insurance for single people.
Supporting Co-Signers on a Loan
Have you taken out any loans that required a co-signer, like a private student loan, mortgage or credit card? In some cases, the creditor may hold that individual financially responsible if you're no longer there to make payments. This financial responsibility could exacerbate an already emotionally difficult time.
One approach you might consider is to take out a term life insurance policy for the duration of the repayment period. However, unlike whole life and universal life insurance, term life insurance will not build cash value over the course of the policy. Although the death benefit is always the primary benefit of any life insurance policy, if cash value is important to you, this may not be the ideal route to take.
Caring for Other Dependents
Spouses and biological children may not be the only people to consider when purchasing a life insurance policy. If you have parents or other loved ones who you support in some way, you may want to take out a policy that could help benefit them.
For each dependent, consider his or her other sources of income — including Social Security, investments and savings — as well as the local cost of food, shelter, health care and other needs. If you help out with certain household chores and maintenance, that may also help reduce their living costs. If it seems likely that their independent funds won't cover all of their needs, you might consider making them beneficiaries of your life insurance.
If you're caring for someone who has difficulty making important financial decisions on their own, like an aging adult or a minor child, you may want to make the beneficiary a trust whose trustee can manage those assets according to your wishes. An attorney specializing in estate planning can help you draw up the proper legal documents in such cases.
Running Your Business
If you own a small business, ensuring that your partners or loved ones will be able to keep it going — no matter what may happen to you — might be a goal of yours. After all, your employees' livelihoods may be connected to the venture's financial stability.
Taking out a policy on your life, along with establishing a succession plan, might help those successors continue to operate your business. In some cases, you might choose coverage through a term policy, although partnerships that expect to operate well into the future might benefit when the owners have permanent coverage in place.
So, do single people need life insurance? The answer is ultimately up to you. A financial representative can help you identify your needs and decide whether obtaining coverage is a suitable move for you.