If no one depends on you financially, your path to financial security may be smoother than most. However, it also means that if the unforeseen were to happen, you may not have someone to rely on for support—financial or otherwise. That’s why there are certain considerations to take into account.
1. It’s cheaper to buy a policy when you’re young and healthy.
Not every young person needs life insurance – and if you haven’t yet established an emergency fund or you’re still living on your parents’ couch, buying life insurance certainly shouldn’t be a top priority. If, however, you’re making the maximum contribution to your retirement fund and have six months of expenses stashed in a savings account, you may want to consider buying a policy.
2. You’ve got co-signed loans or are worried about funeral costs.
If your parents (or other family member or friend) co-signed a student loan or a mortgage with you, they’ll be fully on the hook for the amount owed in the event of your passing. In addition to debt, burial costs can also be expensive – the average funeral costs more than $7,000 – and it can set back loved ones without a significant amount of savings.
If your funeral or your debts will be a significant financial hardship for someone else, consider getting a low-cost policy to cover those expenses – a 10-year term policy naming that person as the beneficiary could take care of such expenses. With unemployment still stubbornly high and most Americans with dangerously low savings accounts, the last burden a grieving family member needs is a loan company hounding him or her for payments.
3.You support others.
This is probably the most important reason a single person should purchase life insurance. Nearly 16 million unmarried parents live with their children, according to the U.S. Census. Even if you don’t have kids, there may be others who depend on you financially, including elderly parents who need caretaking or special needs siblings. The right life insurance policy can serve as a financial safety net for those you care about most.
Work with a financial planner to determine how much life insurance you need on top of any other assets you have in order to insure that your dependents are properly cared for financially after you’re gone.
4. You want your business to continue.
If you’re a small business owner with partners, a life insurance policy can allow your partners to more seamlessly purchase your portion of the business. Partners in the company would enter into a buy-sell agreement, buying policies (either as individuals or as a company) on the lives of the co-owners with the understanding that the payout would go to the deceased partner’s heirs without giving them a stake in the company itself.
5. You want to leave a legacy.
If there’s a cause that you’re passionate about or you’ve got someone you’d like to take care of financially (even if they’re not dependent on you now), purchasing a life insurance policy can help meet those goals. This kind of purchase only makes sense if you can comfortably afford the policy after funding emergency and retirement savings, as well as paying down any high interest debt.
If you do buy a policy as a single, it’s important to re-evaluate your insurance coverage after life events, such as the birth of child or a marriage, to make sure you’re still appropriately covered and to update your beneficiaries. If coverage purchased now becomes inadequate for your needs at a later date, you can buy supplemental coverage, rather than starting from scratch.