The purpose of life insurance is to protect your loved ones from financial trouble in the event of your death. Life insurance is designed to pay funeral costs, possible medical bills resulting from illness, and leftover debts. It is also intended to help cover the loss of your income if you have been working to help support others.
With that said, not everyone needs life insurance... but many people don't realize that they could indeed benefit from it. The following is a breakdown of who should consider purchasing a life insurance policy, and who probably doesn't need one. Read also: Finding the Best Life Insurance Rates.
Single Young Adults
Whether you're in college or working a job, if you're young and single you may not consider life insurance a priority. The main reason that someone in this position might need coverage is to pay for possible medical expenses and funeral costs. If you have some money set aside or an alternative source of funding for expenses like these, chances are you don't need coverage at this time.
One exception to this rule is if you are a single young adult with a dependent. If you have a child or elderly parent that is under your care, then life insurance will help support that person in the event of your death.
Children
With very few exceptions, children do not need life insurance policies. For the most part, if children pass away parents are able to handle the funeral costs and any medical bills. Because nobody depends on a child for income and because they do not have existing debt, life insurance is not necessary.
Newlyweds
A new marriage is an excellent time to purchase life insurance. Even if the couple does not have children, they will be depending on one another for income. Life insurance will ensure that the surviving spouse is taken care of in the event of a death. It will also help cover the cost of a mortgage from a new home purchase, or any other shared debt they may have. Read also: How To Protect Your Retirement Savings With Whole Life Insurance.
Newlyweds without children will also have cheaper rates available to them. Now is a good time to start policies that could benefit your future children later down the road.
Existing families
A married couple with children should be the number one candidate for life insurance! Whether or not you need coverage on both parents is up to you; however, it is strongly recommended. Consider this: even if one spouse does not work and stays at home with the kids, their death would force the other spouse to seek dailychild care, thus increasing expenses. Purchasing life insurance and naming your spouse and children as beneficiaries ensures protection for everyone involved.
Married couples with no children
In this case, purchasing life insurance is really up to the individuals. If both spouses work, they may not depend on one another for income unless their lifestyle is significantly more expensive than it would be with just one income. If the spouses are concerned about covering funeral costs and nothing else, a low-cost term life insurance policy may be a wise choice.
Single adults
An adult with no dependents and no spouse does not necessarily need life insurance. A person in this situation should, ideally, have money in the bank in case of illness or funeral costs in the event of their death; if there is no money available and no other way to fund a funeral, they may want to consider a term policy. Keep in mind that upon your death immediate family members may be in charge of the funeral costs, and life insurance can help avoid giving them that burden. Read also: Life is Tricky, Term Life Insurance is Not.
Single parents
This is another case where life insurance is imperative. A single parent should make sure that their child(ren) will be well taken care of in the event of their death. Minor children without income will be unable to pay for funeral costs or support themselves, and a life insurance policy can ensure their safety. A single parent should have a guardian named for their child upon the event of their death; a life insurance policy payout can help make this transition period for the child go more smoothly and pay for things like college educations down the road.
The elderly
An elderly person who has no dependents does not necessarily need life insurance, except in the case of paying for a funeral or medical expenses. An elderly married couple may want to consider purchasing insurance in order to make sure the other is not left with multiple bills after a death. Do keep in mind that life insurance policies for the elderly are very expensive. If you have not yet begun a policy and are over 65, you may want to consider a savings account or other option before looking into life insurance.
If you're considering a life insurance policy, keep in mind that there are various types of coverage and policy options available. If you need insurance and aren't sure where to start, a provider can help you locate the amount of coverage and policy that's right for you.