Have I occasionally found myself discussing life insurance at a family gathering? Yes. Does that mean I try to convince all my family and friends to get a policy? No. In fact, there are a few of my nearest and dearest I’d tell not to worry about it—at least for now.
Life insurance can be a valuable part of many families’ financial plans, but that doesn’t mean it’s for everyone. Even the most die-hard insurance sales agent would have to admit there are some cases when a life insurance policy isn’t worth it. Based on hundreds of hours researching and writing about life insurance, here’s who I would tell to skip buying a policy.
It’s easy to spot people who aren’t yet ready for life insurance in their lives. If your family is anything like mine, you probably saw at least a few of them at your last holiday.
My youngest sister is in her mid-20s. She rents an apartment and is working on her Ph.D (#proudbigsisterbrag). Cash is tight. More importantly, her finances are separate from her boyfriend’s, and they don’t have major assets or dependents (other than a chubby Chihuahua) to cover.
For the moment, I’d tell her not to stress about getting life insurance. It’s definitely worth setting a reminder for the future, especially if she and her boyfriend get married or buy a home together. But for now, while she’s still handling finances independently, my sister (and others in her position) can concentrate on things like writing her dissertation instead of rushing to get a life insurance policy.
In some cases, people naturally outlive their need for life insurance. Term life insurance is often most attractive to people who are still working to earn a living for their family. This coverage can fill some of the gap if they die and their family misses out on years of income. But by the time people reach retirement age, they may not have dependents at home anymore, and major debts like a mortgage may be paid off (or close to it).
For example, my in-laws have solid retirement savings and have paid off their mortgage. With kids and grandkids out of the house, they don’t have to support other people anymore. If they were concerned that their savings wouldn’t cover final expenses or debts then a life insurance policy may make sense for them, especially a policy tailored to helping seniors with their final expenses. But as it is, they don’t need extra coverage.
A writer in my circle hit it big a few years ago. As in, seven-figure publishing deal, making her book into a TV show big.
Plenty of high-earning people still get life insurance, of course. The point is to help cover your financial contribution, and people who earn more may also spend more. Wealthy families may also be interested in life insurance for other reasons (e.g., estate management). But if my writer friend keeps following her pre-success, down-to-earth lifestyle, her multiple bestselling books and TV adaptation (I’m 98 percent happy for her and maybe 2 percent jealous) may make her rich enough to self-insure the things that are important to her.
That said, the idea of being "too rich for life insurance" is something of a myth. That's because our lifestyles tend to keep up with our income, and we may still need a policy to enable our families to continue living at the level they're used to.
Minors shouldn’t get term life insurance. In many cases, they can’t—life insurance companies (like Fabric) may not offer a policy to people under age 21. Term life insurance is intended to provide a financial benefit for people who depend on your income. Kids are dependents; they don’t provide for others.
In some cases, parents might choose to take out a juvenile whole life insurance policy for their children. Personally, I didn’t go that route for my kids, but these policies can be a way to protect future insurability and lock in low rates, which can make them a worthwhile option to explore for some families.
There’s this one cousin of mine who’s a miserable son-of-a-gun who can barely say hello at the holidays before he’s arguing with his wife again. It’s an open family secret that he’s planning to leave her penniless just to spite her.
Okay, so fortunately, I’m just kidding on this one. If I did have relatives who resented their loved ones this badly, though, getting them to think about life insurance would be an uphill battle.
Even though life insurance has a specific face value (e.g., $500,000 in coverage), it can be hard to feel a strong sense of what it’s really worth. Of course, the main benefit you get as the owner of a term life policy is the peace of mind of knowing that, if you pass away, your loved ones will have a financial benefit to help them. That way, they don’t have to stress out about finances in addition to grieving and picking up the pieces of their lives.
Making the right decision can be tricky, after all. (Want some inspiration? We spoke to three real sets of parents about what policies they chose to buy, and why.)
Life insurance, like other kinds of insurance, isn’t for everyone. I wouldn’t tell someone without a car to buy car insurance, either. If you don’t have loved ones who depend on you or financial goals to protect beyond your lifetime—or if you’re wealthy enough not to need any extra funds—life insurance may not hold much appeal.
In fact, don’t buy a policy! But if that advice feels unconvincing, ask yourself what in your life is truly worth protecting.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards.
Fabric by Gerber Life exists to help young families master their money. Our articles abide by strict editorial standards.
Information provided is general and educational in nature and is not intended to be, and should not be construed as, financial, legal, or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. We make no warranties with regard to the information or results obtained by its use, and disclaim any liability arising out of your use of, or reliance on, the information.
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