You probably already know that life insurance is great at protecting a spouse and kids financially should something happen to the insured person. But what if you don’t have a spouse or kids — is life insurance still for you?
The answer could well be yes. Truth is, there are more benefits to life insurance than many people realize — even for single people, children, and stay-at-home parents.
Here are some considerations that are often overlooked for these individuals.
Do single people need life insurance?
Even if no one depends on them financially, singles may benefit from having a policy. Of course, life insurance provides tax-free funds after the insured person is gone that can cover end-of-life expenses including funeral and burial services (the median cost in 2019 was $7,640*), end-of-life care, medical bills, and estate settlement costs — but there are also potential benefits the insured person can access during their lifetime.
A potential resource for health issues.
Many life insurance policies include “living benefits” that can pay out all or a portion of the death benefit early under defined circumstances, like terminal illness, nursing home confinement or a debilitating chronic condition. It is generally tax-free to the insured person and can help pay for medical treatments, home health care help, a bucket list adventure or whatever the person chooses.
Cash for emergencies and more.
Some types of life insurance (like universal, whole life and return of premium life) build cash value over time. The growth of the cash value is generally tax-free and sometimes guaranteed as well, depending on the policy type. The cash value can be accessed later through loans or withdrawals and used for emergencies, a supplement to retirement income or for any other purpose.
Do stay-at-home parents need life insurance?
Even though they don’t bring home a paycheck, losing a stay-at-home parent can have a significant financial impact on the family. In fact, a recent survey from Salary.com** estimated that a stay-at-home parent now works the equivalent of 106 hours weekly in a variety of roles from van driver to teacher to nurse.
Without them, surviving parents often need to pay for additional childcare, home maintenance services, convenience foods, and more, not to mention any burial costs or medical expenses that might be involved.
Do children need life insurance?
Chances are your young kids (or grandkids) aren’t supporting the family or doing the bulk of the household chores. So why insure them? Because you care about their future. They won’t be children forever. Here are two ways insuring a child can benefit them as adults.
Protect children’s insurability.
Not everyone can qualify for affordable life insurance due to medical or mental conditions, driving behavior or other factors. Minor children are less likely to have these concerns so it’s generally easy and inexpensive to get them coverage (assuming they don’t have a serious health condition) — and “lock in” their insurability as adults.
If a child develops a health condition on the way to adulthood (such as diabetes, cancer, or mental illness), their childhood policy could be the only avenue to affordable individual coverage.
Both term and permanent life insurance policies can protect children’s insurability. If you use term life insurance, which provides coverage for a defined time period and can be very inexpensive, just make sure it includes a good conversion privilege. Conversion privileges allow a term life policy to be exchanged for a permanent policy (designed to provide lifelong coverage) later without having to qualify for it at that time.
Build cash value to help launch them into adulthood.
If you choose to cover kids with a policy that builds cash value, it can not only provide them lifelong coverage (potentially protecting the next generation) but also provide funds that can be tapped for future expenses like education, buying a house and more. Some of these policies can be fully paid for with a single payment or over a limited number of years (for example, 10 or 20 years), so you’ll know the coverage will stay in force even if times get financially difficult for the child in adulthood.
Do you need life insurance?
How much life insurance you need depends on many factors, like how much of your income or stay-at-home services to replace, your mortgage balance, other debts and potential educational expenses. If you want to talk to an expert about whether life insurance makes sense for your situation, contact Irvin Insurance Services today.
This article is not intended to be used, nor can it be used, by any taxpayer for the purpose of avoiding U.S. federal, state or local tax penalties. It is written to support the promotion of the matter addressed here. Irvin Insurance Agency does not provide tax, accounting or legal advice. Any taxpayer should seek advice based on his/her particular circumstances from an independent tax advisor.
Life policies are offered by various carriers and are subject to underwriting approval. Not available in all states.
**Salary.com Annual Mom Salary Survey, May 2021