Life Insurance: Who Needs It?

Life insurance provides cash to your family after your death. With that being said, if someone will suffer financially when you die, chances are a life insurance policy is needed.

The cash, also known as a death benefit, provides income replacement and can help your family meet financial needs such as funeral costs, living expenses, child care, college savings and more. When a death benefit is issued, there is no federal tax income.

Below are examples of how life insurance might apply to your particular situation:


You’re Single:

Most single individuals don’t have many people that depend on them from a financial standpoint. That being said, single people tend to shy away from life insurance. However, there are exceptions. Some single people may be providing support for their parents or a sibling. Others may have a significant amount of debt, that they wouldn’t want to pass on to surviving family members. A critical reason to consider life insurance when you’re single is insurability. If you’re young, healthy, and have good family health, your insurability will be at it’s best from a rate perspective. In return, life insurance companies will be able to offer you their best pricing.

You’re a Single Parent:

As a single parent, you undoubtedly have a child that is depending on you financially and socially. Although that is the case, nearly 4 in 10 single parents have no life insurance. There are a lot of costs associated with being a single parent, but don’t leave out life insurance as being one of them as your child’s financial future is tied directly to you.

You’re Married:

Marriage typically triggers a life insurance conversation between spouses. If you died tomorrow, would the other spouse have the income means to pay off debts like credit card bills, student loans, or a car loan? Along with the debts would be the ability to cover monthly rent expenses and utilities. If you’re planning on having children, it might be a good idea to consider coverage prior to becoming pregnant.

You’re Married With Children:

If marriage didn’t trigger the thought of life insurance, having children will likely start the process. When you become a parent, you realize that your children literally depend on you for everything. Most families depend on two incomes to balance their budget. What would happen if you died suddenly? Would your family being able to meet all of the financial obligations i.e. mortgage, child care, groceries, utilities and any potential investment or college saving goals? Life insurance helps make sure that financial goals can still be met if you were to die.

The Empty Nesters:

Your children are now old enough to be on their own, with their own financial obligations and dependents. Does that mean that life insurance is no longer a need for you? Not necessarily. If something were to happen to you, would your spouse have the means to either pay off existing debts and maintain his/her style of living or would they have to consider dipping into retirement accounts?

You’re Retired:

Depending on the size of your estate, your heirs could be charged an estate tax (up to 45%) after you die. The life insurance proceeds related to your policy could help take care of such taxes, funeral costs, and current debts. This helps avoid the need to quickly liquidate assets.

You’re A Small-Business Owner:

Life insurance is also used to help protect your business. What kind of position would your business be in should you or a key employee die? A common strategy used for business owners is a buy-sell agreement. This allows remaining owners to buy the company interests of the now deceased owner. This way, both the business and the family are compensated. Key person insurance is also available and payable to the company. This type of coverage provides flexibility to the owner should they need to hire a replacement or set up alternative terms.