5 Reasons To Buy Life Insurance When You Are Single

From a practical standpoint, the younger you are, the more affordable life insurance is going to be. If you are currently single, but envision needing life insurance in the future when you are no longer single, locking in a more affordable rate today will save you money in the long run.

For example, say that a 30 year term life insurance policy with a $500,000 death benefit costs $45 per month at age 25. If you were single at 25, you could lock in an affordable life insurance policy for the next 30 years. However, say that you waited to buy life insurance at age 35 when you were no longer single and now had dependents.

That same 30 year term policy may now cost $60 per month. (These numbers are not based on real quotes.) The $15 difference each month may seem trivial, but it is a difference of $5,400 over the course of the policy in the example.

Additionally, looking into life insurance when you are young can give you a more concrete idea of the type of life insurance that meets your needs as well as how much coverage you need. If life insurance becomes a future need when you are no longer single, you will have a better idea of what to look for.  

The ability to obtain life insurance coverage is not only dependent on your age, but your health as well. If you are single, your current plan may be to wait until you have a long term relationship or dependents to obtain life insurance.

However, everyone knows that unexpected life events do happen - including unexpected health problems. By waiting to obtain life insurance until you are no longer single, you run the risk of not qualifying for coverage.

For example, say that John is currently a healthy 25 year old who exercises regularly and keeps his alcohol and drug consumption to a minimum. In John's mind, life insurance is something that can always be bought later on when he truly needs it.

Let's fast forward 5 years. John is now married and his wife just gave birth to their son. John decides that it is time to start looking for a suitable life insurance policy. The next day, John wakes up with a pain in his chest. After going to the doctor, John finds out he has a rare heart condition.

This health concern may disqualify John for coverage or at the very least increase the cost of the premiums significantly. If John were to have bought a policy 5 years ago, he would have already been prepared for this unlikely situation.

Very few people think that they will have a future health problem that will disqualify them from life insurance, but as everyone knows life is unpredictable. Buying life insurance while single can be smart as it will protect you from the unlikely event of future health problems.

Even if you are single, it is likely that you care about other people. This may be your family, your friends, your work colleagues, etc. Although life insurance is typically bought to protect individuals that are directly dependent upon you (spouse and children typically) it can also be bought to protect other people that you care for.

For example, say that your sibling has young children and you are the fun aunt or uncle that is involved with them. Perhaps you help your sibling by picking up their children from school on occasion or taking them for a weekend day to give your sibling a break.

If God forbid you passed away unexpectedly, your sibling would not only be grieving from your loss, but their children would also lose the services that you provided to them. If you had a life insurance policy, some of that money could go towards your sibling that they could use to hire a nanny to replace all of the things you did for their children.

Now, this specific situation may not apply to you, but there may be one in your life that is similar. You do not have to be in a relationship to justify having life insurance. There may be a circumstance in which you can protect other people that rely upon you outside of a relationship.

Another pragmatic reason to buy life insurance when single is that it can cover funeral costs and potential debts that you leave behind if you pass away unexpectedly. According to the National Funeral Directors Association, the average cost of a funeral is $8,300.

A small life insurance policy would easily be able to cover this cost. Although it is not going to make it easier on your family and friends to grieve your passing, it can help alleviate the financial costs of a funeral. It is important to remember that even if you are single, there are other people who care about you that will want to have a funeral if you pass unexpectedly.

Additionally, a life insurance policy can cover any potential debts that your loved ones may be responsible to cover if you should pass away. For example, say that you had bought a new car a few years back and your parents co-signed the loan to help you obtain a more favorable interest rate.

If you were to pass away, your parents may be responsible to take over that loan payment. To continue this idea, you may have also taken out student loans to obtain an education. Most federal student loans will die with the borrower if the borrower passes away.

However, there are some types of student loans where a co-signer of the loan would be responsible for the payment if you were to pass away. You do not want to leave your co-signer with this burden. Not all of these situations may be applicable to you.

The point here is that a life insurance policy can help cover these costs that you may leave behind if you pass unexpectedly regardless if you are single.

When you think of life insurance, the first word that likely comes to your mind is protection. This is perfectly logical and is also true. However, life insurance can be used for more than just protection. It can also be used as a financial tool which can be a big reason to buy it when you are single.

This may sound a bit confusing so let's break this down further. In general, there are going to be two types of insurance policies that you could buy when single. First, is term life insurance. Term life insurance covers you for a set period of time such as 10, 20, or 30 years.

If you die during that time, the death benefit of the policy will pay out to your beneficiaries. If you are still alive at the end of the term, the coverage lapses. Pretty straightforward right? The second type of life insurance is called permanent life insurance and is a bit more complex.

As the name implies, permanent life insurance covers you for your entire life as long as you pay the premiums. One of the most common types of permanent life insurance is called whole life insurance. Whole life insurance is often used for more than protection.

Here's how it works. When you buy a whole life policy, your money goes into three buckets. The first bucket goes towards covering the cost of your insurance (i.e. death benefit). The second bucket goes towards covering some of the costs of the insurance company.

The final bucket goes towards building what is called cash value. The cash value component of a whole life policy is a savings account built into the policy. When you pay your monthly premium, your insurance company will invest your cash into conservative investments and pay you a guaranteed rate of return.

Over time, this cash will grow. You can use this cash as a financial tool by taking withdrawals, taking loans against the value of the cash, and paying for the cost of your insurance. If you are single, a permanent life insurance policy may be a good option for you as you will get benefits from the policy while you are still alive.

Keep in mind that permanent life insurance policies are complex. Make sure to work with a competent life insurance agent before you buy one to ensure you have a proper understanding of the policy.

If you do opt to buy a life insurance policy when you are single, a logical next question would be how much coverage do you need? This is a tricky question to answer as you do not have any dependents that rely upon you financially

If you did have dependents, the typical recommendation you would hear is to multiply your income by 10 to 15 times and add in more coverage to cover outstanding liabilities such as a mortgage, car payments, and future educational expenses for children.

However, if you are single the equation changes. A good starting point is to make sure you have enough coverage to cover any debts or expenses that you may leave behind if you were to pass unexpectedly. For example, say that you recently graduated college with $50,000 in student loans.

You also went out and financed a car for $25,000 upon getting a new job out of college. Say that your parents co-signed both of these loans and would be responsible to continue making payments on them if you were to pass away.

Additionally, the cost to have a funeral for you would be about $8,300. When all of this is totalled up, you would leave your loved ones a $83,300 bill. A good starting point for you would be to have at least $83,300 in coverage but you would likely need to round up to $100,000 when buying a policy.

Depending on your individual circumstances, you may need more or less coverage than this. You can always buy more coverage as your needs change later in life, but make sure that you cover your bases if you opt to buy a policy when single.  

Up until this point, we have given five reasons to consider buying life insurance when you are single. However, is it an absolute must? No it is not. If you are single, life insurance is not nearly as important as it is if you have dependents such as a spouse and children.

Whether or not you buy life insurance when single is a personal decision. Hopefully you now understand that there are benefits to it, but it will not make sense for every single person. Buying life insurance before you absolutely need it can help you get ahead, but those dollars may also be better utilized elsewhere.

The bottom line is that buying a life insurance policy when single can make sense for some individuals. It will allow you to get a better rate, mitigate any future health concerns that would disqualify you, and protect your loved ones from any financial burden you may leave behind if you pass unexpectedly.

With that being said, life insurance when single is not an absolute must. Those dollars may be better utilized saving for retirement, paying down true debt such as credit card debt, or saving for other goals. It is up to you to decide if buying a life insurance policy when single is worth it or not.