Life insurance typically springs to mind for couples with kids. But life insurance still may be something that single people should consider, particularly in light of the fact that about half of American adults aren’t hitched.
So, why should a single person who doesn’t plan to get married buy life insurance?
“There are many benefits of a single person owning life insurance,” says Maggie Mitchell, vice president of advanced sales at financial services company ING U.S. “Life insurance can help pay for final expenses, medical bills and pay off any debts, such as a mortgage. It can also be used to provide direction and benefit to loved ones, such as nieces or nephews, brothers or sisters, or a favorite charity, all of whom could be designated to receive the insurance death benefit.”
JS Ledoux, assistant vice president of life and annuity products at financial services provider Foresters, says it’s best for a single person to buy life insurance early in adulthood. Later in life, a life insurance policy could become more expensive and more difficult to buy, he says.
“Even though some people don’t plan to get married or have kids, life evolves, circumstances change and if the currently single person ends up having a family later on in life when they are (potentially) less insurable, they will be happy to have purchased that low-cost policy at a young age,” Ledoux says.
How inexpensive can life insurance be for someone who’s young and single? For a healthy 30-year-old who doesn’t smoke, a 30-year term life policy valued at $100,000 may cost less than $20 a month.
“Life insurance is essential to most people at some time in their lives,” Norbert M. Mindel and Sarah E. Sleight write in “Wealth Management in the New Economy.” For one person, that moment may come with marriage. For another person, it might be when he or she becomes passionate about a charitable cause and wants to leave a legacy.
Charity and life insurance
When it comes to designating charities as beneficiaries, MetLife financial adviser Scott Storick says life insurance benefits aren’t part of the probate process, and in many cases the benefits aren’t tax-deductible, “making the process of gifting life insurance easy for both the insured and the beneficiary.”
Before making a charity a beneficiary, an insurance company might require proof of “insurable interest,” defined in “Understanding the Law” as “when a person has a real economic risk related to the property or person insured.” As explained by Ledoux, insurable interest means the beneficiary has more to be gained “by the insured being alive rather than dead.”
MetLife determines insurable interest by confirming that the charity is legitimate, Storick says. For instance, is there a pattern of gift-giving to the charity, is there a connection between the charity and the policyholder, and is the charity well-established?
“Once a charity or organization is chosen as a beneficiary, it is non-revocable, so we want to ensure that we are taking care of the client’s needs and requests,” Storick says.