If you are single and childless, chances are you have skipped buying life insurance. But you may want to think again. Scratch below the surface, and you’ll see that life insurance often is as valuable for singles as it is for people with spouses and children.
“Life insurance ensures that the people you care about will be provided for financially, even if you’re not there to care for them yourself,” says Stephen Rothschild, chairman of the Life and Health Insurance Foundation for Education (LIFE).
Here are five reasons why singles might consider buying life insurance.
1. You plan to have a family someday.
Even if you’re wedded to the single life, chances are you’ll get married to someone someday. In 2009, 70 percent of all Americans 15 and older had tied the knot at least once, according to the U.S. Census Bureau.
Buying life insurance when you’re younger and healthier typically is much cheaper than waiting until later in life, says Jeanette Meitz, corporate vice president at New York Life.
“Buying it now can save thousands of dollars,” she says. “It’s simple math.”
Younger buyers of permanent life insurance also have more time to accumulate cash value in their policies.
“After the cash value in a permanent life insurance policy has accumulated for a few years, it can be borrowed for any reason,” Meitz says.
If you’re young and remain on the fence about buying life insurance, Meitz encourages you to ask yourself a couple of questions: “Do you think sometime in the next five to 10 years, you might have a family? Do you think you’ll have more disposable income now or then?”
2. You have aging parents.
People generally buy life insurance only if someone else depends on their income, Rothschild says.
“Most single people do not fit that mold,” he says. However, he says, there are exceptions to that rule. One example: Single people who financially support siblings or aging parents.
As life spans increase and a growing percentage of the population chooses not to marry, more singles find themselves footing the bill for aging parents, says Wendy Boglioli, a spokeswoman for Genworth Financial.
“It is very common for adults to provide some form of financial support to their elderly parents,” she says. “Life insurance can ensure their parents have income.”
3. You have debt.
While it’s true that most of your debt expires when you do, that isn’t always the case.
“Many parents co-sign loans and would be left with this debt if something happened to you,” Meitz says.
She thinks singles have an obligation to make sure this doesn’t happen. A life insurance policy can provide parents with money to pay off the debt.
“Your parents protect you,” she says. “Now it’s time to protect them if something happened.”
Your heirs have no legal responsibility for most of your debt, such as that related to credit cards or a mortgage. Still, that debt likely will be subtracted from any amount that heirs receive from your estate.
A life insurance policy can help pay off this debt so your heirs get more of the money you’ve earmarked for them. Life insurance also can help loved ones pay for your funeral, Boglioli says.
“The cost of a funeral is very high today – $10,000 to $20,000,” she says.
Even if you won’t have heirs, many singles still may consider life insurance to pay their debts, Boglioli says. “They believe they have a moral obligation to settle their estates,” she says.
4. You own a business.
Singles who own small businesses may be so close to business partners that they see them as part of the extended family. If you have such a relationship with your business partners, you probably care about their future and the longevity of the business you’d be leaving behind.
“For the single person who may be a business owner, life insurance could help ensure the continuity of the business,” Boglioli says.
For example, you and your partners could purchase a “key person” insurance policy on your life, Rothschild says.
This type of policy gives your partners “the financial flexibility to hire a replacement or to support the economic loss as the replacement gets up to speed,” he says.
Life insurance also can be used to finance a buy/sell agreement. This arrangement lets surviving partners buy out the deceased partner’s share of the business at a set price.
There are various ways to arrange this type of insurance. In one example, each partner buys a life insurance policy on each of the other partners. If one of the partners dies, the surviving partners use the life insurance proceeds to buy out the deceased partner’s share of the business.
In a buy/sell agreement, partners get the benefit of keeping the business functioning smoothly and under their control, while your heirs get the benefit of a payout.
5. You want to help a favorite organization.
Singles may not have spouses or children, but they still care about the future. Life insurance can be a great way to provide for other people they love, Boglioli says.
“The single person might want to leave a financial legacy to a friend or family member, or fund an educational trust for a favorite niece or nephew,” she says.
Or perhaps you have a favorite cause that makes the world a better place. “They might also want to leave a legacy to a favorite charity, church or civic organization,” Boglioli says.