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At Fabric, we readily accept that not everyone needs life insurance. It’s true.
Lots of people consider life insurance for the first time when they have kids or start a family because this kind of insurance replaces lost income if they were to pass away.
That said, there are lots of reasons that single people—including those without kids—might also consider life insurance. (What is life insurance, exactly?)
More than a quarter, or 27 percent of children in the United States live in a single-parent home, according to Census data.
“When an individual, especially a single person, has a dependent, it’s important to consider life insurance,” says Nicholas Scheibner, a Certified Financial Planner with Baron Financial Group who specializes in working with special needs families.
“If there’s not a spouse or family member, you want to make sure there are funds available outside of what the government would give,” Scheibner says.
Single parents might feel extra pressure to help make sure their kids would be covered financially, since there isn’t another parent available to contribute. This is where life insurance comes in. There are two main types of life insurance, term and whole life. Term life insurance policies tend to be significantly less expensive than whole life policies, which can make them an attractive option.
Families come in many forms. Even if you don’t have children of your own, you might financially support aging or ill parents, siblings or children in the family who aren’t your biological kids. That could also mean a spouse, partner or even a roommate who depends on your income in order to pay rent every month.
If there’s anyone in your life who relies on your income, purchasing a life insurance policy can be an important source of protection and peace of mind.
Scheibner stresses that those who care for people with special needs should work with an attorney who focuses on special needs estate planning. It’s important to designate the dependent’s special needs trust as the beneficiary of the policy, and not the dependent directly, to stay eligible for as many government resources as possible.
A professional can advise you on the best way to set up accounts and policies your dependent may need if you’re not around.
Paying for college is hard. If you have a college degree and don’t have student loan debt, you’re something of a rarity.
About 44 million borrowers share nearly $1.5 trillion in debt, or an average of around $33,000 per person.
Federally funded loans get discharged if you die before you can pay them off (a family member will need to submit proof of death).
Some private loans will discharge the remaining balance if you pass away. Note the word “some.”
If your parents cosigned a loan for you, they could be left on the hook to pay the bill. Especially your parents have other financial obligations, like helping your siblings pay for college, getting hit with unexpected debt like this could snowball into a serious financial problem for multiple people.
Read the fine print on your student loans and any other debt for which you have a cosigner (like an auto loan or credit card debt).
If you have debt that will stick around after your death, consider taking out a term life insurance policy to help protect your cosigners. You might base the coverage amount on the total balance of your debt; consider purchasing a policy with a term length that lasts as long as it’ll take you to pay the balance. (Read more: How much life insurance do I need?)
If you’re a single homeowner with a mortgage, it might be worthwhile to purchase a life insurance policy in an amount that will cover your payments, even if no one else lives in your home with you.
For one, federal law allows the ownership (and remaining mortgage balance) to transfer to one of your relatives if you die. That relative would have to decide whether to make payments, refinance the mortgage, sell the house to pay the remaining balance or allow the home to go into foreclosure and be seized by the bank.
Especially if your relatives can’t afford your mortgage payments and need to sell the property quickly, this can add financial burden and stress on them at a time when they’ll already be grieving.
A life insurance policy with a payout large enough to pay off your mortgage balance would remove the pressure on your loved ones to make a quick decision.
You may decide you’d like to leave your home to a friend or family member, or even donate the property to a cause you support. If your estate covers the mortgage balance, you’ve got more options for the kind of legacy you’d like to leave with your house.
The same logic that applies to parents co-signing your student debt applies to other kinds of debts. If your spouse is a co-signer or account holder on your credit card debt, for example, they'll still be responsible for your debts after you're gone. This is true of car loans, personal loans and other debts, too.
If you want to provide for your co-signers so they don't get stuck paying down debt after you're gone, life insurance could fill the gap.
Reaching your dream of opening an artisanal cheesemaking shop with your best friend is a major achievement. If you die unexpectedly, your business partner could face a financial nightmare.
Funds from a life insurance payout could help cover your share of any business debts, help protect your personal property if you put it up as collateral and give your partner a little more time to decide what to do next. (Here's more on what entrepreneurs should know about life insurance.)
Generally speaking, if you co-own a business, you should discuss contingency plans ahead of time. If you want the business to continue after one of you dies, calculate how much money you’d need to get through financial challenges. If you’re prepared for the business to fold should one of you die, make sure you can cover any debts. An attorney in your state can help you work through all the details.
Final expenses can be costly, with average funeral costs hovering around $7,000 or $8,000. If your loved ones don't have that kind of money on hand, you might choose to help them defray the costs through a life insurance policy. For the most part, your beneficiaries can use the death benefit they'd receive however they want, which includes paying for expenses like burial, cremation, flower arrangements and more.
If close family members suffered from genetic conditions such as diabetes or heart disease and you're worried that you might develop those conditions as well, you might choose to apply for life insurance sooner than later. While your family health history may be taken into account during the underwriting process, life insurance may nonetheless be more affordable while you're still healthy. Plus, the younger you are, the less you'll generally pay in premiums.
Once you've been diagnosed with a serious illness, your rates will likely increase and you might have trouble being covered for life insurance at all.
If you're the kind of person who's planning to leave behind a donation to a charity or other cause that's important to you, you'll need to save a significant sum while you're still alive. If you dream of creating a scholarship fund or some other generous gesture upon your passing, life insurance could be one way to make that possible.
Once you decide a term life insurance policy is a worthwhile way to help protect loved ones who depend on your income, it’s time to iron out the details of a policy. One of the most important aspects to decide is how long you need coverage.
Term life insurance is designed to replace your income. For that reason, it often makes the most sense to buy a policy during your career years.
If your goal in getting a policy is to help pay your mortgage or other debt, and you’ve got 18 years to go, then a 20-year policy could be perfect. Similarly, if you have kids who will graduate and leave home in 10 years, that may be all the coverage you need.
Other times, it can be harder to determine how much coverage is right for you. For example, parents of kids with special needs may need to provide for their child’s entire life.
In cases like that, Scheibner recommends talking with a financial planner about a guaranteed universal life insurance policy, which is a form of permanent life insurance that tends to be cheaper than whole life policies. Or you may decide it’s best for your budget to purchase a cheaper, term life policy now, and convert or add a permanent life insurance policy later on.
Single people don’t fit into one mold, so there’s no single term life insurance solution, either. The more people who would be affected financially by your loss, the greater the likelihood that a term life insurance policy is worth checking out.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards.
This material is designed to provide general information on the subjects covered. It is not, however, intended to provide specific financial advice or to serve as the basis for any decisions. Fabric Insurance Agency, LLC offers a mobile experience for people on-the-go who want an easy and fast way to purchase life insurance.
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Blame participation trophies or the fact that many millennials entered the job market around the time the Great Recession hit, but millennials sometimes have a hard time shaking a reputation for being stuck in extended adolescence. The truth is, the generation that coined “adulting” as a verb has been grown up for a while now. Most millennials have already seen our 10-year college reunion come and go, or we may face the shock of hearing we’re experiencing a “geriatric” pregnancy (at 35, really?). As your life grows to include more responsibilities and loved ones who depend on you, it’s time to consider whether life insurance might be the right next step.
Top signs of “adulting” include saving money, doing taxes, and signing up for life insurance, according to Fabric’s new research. Read on for more surprising insights.
Accidental Death Insurance policies (Form VL-ADH1 with state variations where applicable) and Term Life Insurance policies (Form ICC16-VLT, ICC19-VLT2, and CMP 0501 with state variations where applicable) are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT (all states except NY), and by The Penn Insurance and Annuity Company of New York (NY only). Coverage may not be available in all states. Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Policy obligations are the sole responsibility of Vantis Life.
All sample pricing is based on a 25-year old F in Excellent health for the coverage amount shown. All samples are for a 10-year term policy, unless otherwise stated. Term Life Insurance policies (Form ICC16-VLT, ICC19-VLT2, and CMP 0501 with state variations where applicable) are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT. Coverage may not be available in all states. Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Policy obligations are the sole responsibility of Vantis Life.
A.M. Best uses letter grades ranging from A++, the highest, to F, companies in liquidation. Vantis Life’s A+ (Superior) rating, which was reaffirmed in April 2020, ranks the second highest out of 16 rankings. An insurer’s financial strength rating represents an opinion by the issuing agency regarding the ability of an insurance company to meet its financial obligations to its policyholders and contract holders and not a statement of fact or recommendation to purchase, sell or hold any security, policy or contract. These ratings do not imply approval of our products and do not reflect any indication of their performance. For more information about a particular rating or rating agency, please visit the website of the relevant agency.
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