Unlike owning car insurance, which, according to the Insurance Information Institute, is required by law in most states,¹ life insurance is not a mandatory purchase. Although, we might all be better off if it was required. According to a recent MetLife study, only 49% of families say they have recovered financially from a death that occurred as many as seven years ago.²
So who needs life insurance? We'll give you the short answer and the long answer.
The short answer is "people who have others depending on them."
What does that mean?
If you have a child, spouse or relative whom you support financially, otherwise known as dependents, life insurance is a good option to make sure that they are taken care of financially if you pass away.
In the case of your death, your benefit amount can help your loved ones pay for funeral costs, mortgage payments, everyday living expenses, college education and maintaining the lifestyle you envisioned for them.
Now for the long answer:
Aside from having dependents, there are a few other scenarios in which you may want to explore life insurance:
I’m a single person with no dependents
Most single people with no dependents need very little life insurance, but if they are carrying debt that would be passed to another person like student loans, or have a charitable cause that they’d like to support with a benefit, some purchase a policy to meet those needs.
I’m married with no kids
Many couples without kids still choose to purchase life insurance policies, especially if they are a single income family. This covers final expenses and allows some time for the remaining spouse to either transition back into the workforce or continue to stay at home.
I’m married with kids
Life insurance for parents is a must-have. Depending on the age of you and your children, term life insurance can be the go-to for a large amount of coverage for the least amount of money.
I’m a stay-at-home parent
Like we’ve talked about before, the contribution of a stay-at-home parent is huge – and often underestimated. Some single income families are choosing to insure both parents to protect the important role that a stay-at-home parent plays.
I’m an entrepreneur, own my own business, or work for a small startup without benefits
Just like health care, you probably know that getting a life insurance policy is a little more complicated than it is for someone with an employer-sponsored group plan. Much like covering the contributions of a family member, your role in your business is essential to its success … and worth protecting. Many people in this situation choose to purchase an individual life insurance policy.
I have aging or disabled parents
Some people who either currently support their parents or plan to do so in the future choose to purchase extra insurance coverage to make sure that the money will be there if something happens to them.
I want my child to attend college
Many people take college tuition payments for their children into consideration when choosing how much coverage to own. A life insurance benefit that covers tuition can ensure that your goal of helping your child attend college is protected.
Who doesn’t need life insurance?
Don’t get talked into an expensive policy if you don’t need life insurance.
If you have enough savings to cover your funeral expenses, support your family’s lifestyle and/or don’t meet any of the situations above, you may not need life insurance.
We recommend taking the money that you might have spent on a life insurance policy and using it to build your savings or pay down debt.
If you have more questions about who should explore life insurance, send us an email and a real person will help you out.
¹http://www.iii.org/issue-update/compulsory-auto-uninsured-motorists
²https://www.metlife.com/about/press-room/us-press-releases/2015/index.html?compID=184367