Who Needs Life Insurance?

Not everyone needs life insurance. The general principle is that you only need life insurance should you have dependents. Usually, dependents are children who still live at home or have yet to graduate from college. But a dependent could be anyone who is financially dependent on you, just like a partner, sibling or a maturing parent.

Life insurance is generally designed for younger, working people with family members. Here's why: Life insurance is designed to replace your "value" to your family once you're eliminated. For a working parent, a large part of that value is your salary. If you die, you'll want your family to receive enough money to displace your salary for at least the next five to seven years even if you're a stay-at-home parent, you still have financial worth to your loved ones. Let's say you care for two small children. In the event that you die, then your spouse will need to keep operating, which means the kids will need a nanny or day time care. You might not need a large life insurance policy, but you can buy a policy that suits the financial needs of your family. Read about Covid 19 Insurance for Employees, Millennials Insurance, and much more.

Some people buy life insurance coverage policies when they get married, particularly if the insured person makes considerably more cash that the spouse, or if either the covered or the partner have other financial dependents, like mothers and fathers or siblings. Most people purchase life insurance when they get pregnant with their first child.

Once you've reached retirement age, there's less of a need for life insurance coverage. Now your children are most likely financially independent and you're already living on retirement savings and investment earnings. One reason for an older person to keep a life insurance policy is to provide extra money for his or her husband or wife to cover unexpected medical and long-term care expenses later on in life.

Some older people hold onto life insurance policies as a way to pay for "end of lifetime" expenses like the cost of settling an estate. But the most fundamental reason behind retaining a life insurance policy later in lifestyle is also the oldest reason: to protect the price of your funeral and burial.

Another reason to buy life insurance coverage to is to pay for a particular expense. If you buy a home, it's common to sign up for a 30-year mortgage. But what if you die in 10 years? There are particular life insurance policies that are tied directly to mortgages, decreasing in value as you continue to pay off the mortgage debt.

A less normal reason to get life insurance has to do with business rather than family. Suppose you're a partner in a small business and the success of the business relies significantly on your ability to bring in clients and money. Some people buy life insurance coverage policies that name their business partner as the beneficiary. This chunk of cash could help the business stay afloat while they learn to get along without you.

So now you have a better idea of who requirements life insurance. But what type of life insurance coverage should you buy? Are they strictly for emergencies or can they also be reliable expense tools? We'll talk about all of the different types of life insurance in the next section.