Depending upon what stage of life you are at, you may think that you don’t need life insurance. If that’s what you believe, think again! And think long and hard! Virtually everyone needs at least some minimal level of life insurance coverage, if for no other reason than to pay for final expenses.
But there may be other reasons to carry a more substantial amount of life insurance, even if it doesn’t seem necessary based on your life circumstances. Here are some of the life stages at which you may not think that you need life insurance – and the reasons why you actually do.
Single – and especially young and single
You’re single and you have no dependents, so it’s hard to imagine why you would need life insurance. And if you are young to boot, the prospect of your own death seems so remote that it shouldn’t even be considered – at least not as it relates to investing your hard-earned dollars.
But even if you are single – and even if you are young and single – there may still be reasons why you need life insurance coverage. We’ve already discussed the need to have at least a little bit of coverage so that final expenses will be paid. And obviously you don’t want to burden your parents or other loved ones in paying for these expenses. This is especially true if their own financial resources are limited.
Speaking of which, if your next of kin are in a tight financial position, having a generous life insurance policy could be a way of improving their situation in the event of your death. They will already be distraught as a result of your passing, but the financial windfall that a life insurance policy will provide will go a long way toward improving their financial situation.
Retired
Once again, paying for your final arrangements will be necessary even when you’re retired. But more important will be making sure that any medical expenses incurred because of illness or other treatments that preceded your death will be covered through the insurance proceeds. Your spouse will undoubtedly need all of the other financial assets you have accumulated during your lifetimes in order to survive for the rest of his or her life. A life insurance policy can prevent those from being drawn down to pay burial and medical expenses.
Still another factor will be to meet any desire you have to leave an inheritance for your children or other beneficiaries. Life insurance will ensure that you will have additional resources along with your accumulated savings and investments to leave to your heirs. This will be even more important if your financial assets are not very substantial, and you would like to leave a large nest egg behind. Life insurance is the perfect way to pass wealth on to your children, especially if you don’t much money right now.
Divorced with dependent children
There may be a thought that if you have children and you are divorced, that your children will be taken care of by your ex-spouse in the event of your death. But it is important to realize that the ex-spouse will then be in a position of having to provide full care for your children absent any resources contributed by you.
This is a factor whether you are paying child support, or you are the custodial parent providing primary care for the children. If you’re paying child support, the need for life insurance is more obvious. As the primary caregiver, your death may create the need for an outside caregiver for the children. This can be expensive, particularly if your children are young. You may need well in excess of $100,000 just to cover childcare, in addition to other expenses that will fall completely on your ex-spouse. Even if you are not on good terms with your ex-spouse, you still need to be sure your children will be properly provided for upon your death.
Empty nest couples
Once your kids are grown and gone, and self-supporting financially, it can be tempting to cancel life insurance policies feeling that there is no need for them. But that’s not always true.
In addition to providing financial resources to cover your final expenses and carry over medical debt, you will want to have sufficient funds to leave to your spouse so that he or she will have at least enough resources to carry through to retirement. In addition, adult children are returning to the nest in record numbers – commonly known as “boomerang kids” – and this is an expense that could fall on your spouse after your death. Sufficient resources should be available to prepare for this eventuality.
And once again, you should also consider the desire to leave assets to your children. An early death by you could leave your spouse in a position of needing to drain down all of your current financial resources just to survive. At that point, there will be nothing to pass on to your children when your spouse dies. Life insurance could allow you to leave money for your children, even many years after your passing.
