If youre like most people, youll purchase life insurance if you decide to get married or have children milestones that are coming later and later for many Americans. According to the Insurance Information Institute, only 18% of life insurance is held by policyholders under 25.
For some, this makes sense. Marriage and children definitely increase the number of people dependent on your income. However, even if youre young and single, there may be circumstances in which your death could financially hurt your friends or family members and other reasons to sign up for life insurance.
You have significant financial obligations
Today, many start their adult lives with a significant amount of debt, including an average of $29,400 in student loans.If you die, your federal loans will be canceled, but if youve taken out private loans with the help of a co-signer, that person may be on the hook for the remainder of your payments.
Credit card debt works in a similar way. If you have your own card, any debt will be canceled if you die. But if you share a card with someone else that is, if theyre a joint cardholder, rather than an authorized user theyll inherit your debt. A life insurance policy for at least the amount of your debt or loan will protect co-signers if you can no longer make payments.
Family members depend on you
Regardless if you live with your family members, they may depend on you to get by. Perhaps one of your parents is elderly or handicapped and needs you to do their shopping or chores. Or maybe youre helping a sibling through school.If you were to die, theyd still need help but might not have the means to pay for it. A life insurance pay-out could defray bills for in-home care or educational costs.
Youre worried about funeral costs
Funerals are expensive. In 2012, the national median cost was $7,045 not including common needs like vaults and markers. If youre worried that that expense would be unmanageable for your friends and family members, and youre not prepared to set money aside yourself, you might consider a small life insurance policy.
They can also help cover final expenses a factor if you and your family would be unable to afford medical bills from an illness.
You own a business
More than half of millennials either have started a business or would like to. Its a reasonable response to a slow job market, but entrepreneurship can also be financially demanding.
Much of your personal net worth might be invested in your company, and if you have business partners and employees, the situation is even more complicated. Its best to consult with a lawyer for details, but a life insurance policy could allow your co-owners or employees to buy out your portion of the business or take other necessary action if they couldnt otherwise afford it.
Whats the next step?
For some singles, doing without life insurance is perfectly fine. Keep in mind, though, that buying a policy when youre young is significantly less expensive.
Its also less expensive and usually sufficient to choose term coverage a policy that protects you for a specified period of time over whole life. Most only need protection until theyve paid down debt (including student loans and possibly a mortgage) and retired. Whether you need it now or later, life insurance is a great way to make sure those close to you are protected.
Alice Holbrook writes about investing and insurance for NerdWallet, a website that helps consumers make smarter financial decisions.