If you are single, you may think life insurance is one of those things meant for people with families. After all, almost every blog post or article about life insurance features photos of smiling parents and their kids. Generally, life insurance calculations focus on one thing — securing your family’s future. All of this can create the impression that life insurance is not necessary for single people. But that is certainly not the case.
There are several reasons for single people to put a life insurance plan in place, whether they have dependents or not. Continue reading to find out more about life insurance for singles.
Do I need life insurance if I am single?
There are several situations in which single people are better off having life insurance.
You have student a loan
If you have a student loan, life insurance can come in handy. Otherwise, should you pass away, your co-signer could be liable for any outstanding loan repayments.
While all federal student loans are discharged if the borrower passes away, private student loans are usually not. If you have a private student loan and die prematurely, your co-signer could have to pay many thousands of dollars to payback your loan. In the absence of a co-signer, the debt may be passed on to your estate.
If you have a student loan and someone you care about has co-signed it for you, we recommend you consider getting term life insurance. Term life insurance is an affordable way to protect your co-signer and have peace of mind.
You have a mortgage
Still wondering why you need life insurance if you are single? Well, here is another reason. A life insurance policy can help your loved ones pay off the balance on your mortgage and keep the house you loved so much should you pass away. If you are single and buy a house with a home loan, consider buying a term life policy that has enough coverage to cover the mortgage and lasts for as long as the mortgage term.
This is the main reason why Miles Baker, a financial advisor, purchased term life insurance while he was still single. “I bought my first term life plan when I was about 25 years old and co-purchased a house with my brother.”
Both were starting their career at that time. So, neither could have afforded to pay the mortgage on their own if something happened to the other sibling.
Miles says, “We were aware of this fact and that’s why we both bought a term life policy and named the other as beneficiary. Our policies have enough coverage to cover the debt and provide a sizeable extra to compensate for any extended time off work.”
If you pass away, the policy’s proceeds will go to your beneficiary, who can use it for paying off the home loan. If you have asked a loved one to co-sign your mortgage, naming them as your beneficiary will allow them to pay off your mortgage. Using term life insurance as mortgage protection allows you to ensure the home down payment and the money paid by you into your home loan benefits someone after you are gone.
You have co-signed debts
Do you have a co-signer listed on your credit debt or car loan? If yes, they will be saddled with the debt after you are gone.
If you have a debt co-signed by a loved one, an easy and cheap solution is to take out a term life policy. It will enable them to pay the balance if you die before you are able to pay off the debt yourself.
You have financial dependents who are not biological children
Just because you are single does not necessarily mean you do not have people who depend on you. Perhaps you have an aging grandparent or parent who relies on you. Or you are a single parent with young kids. If someone relies on you financially, life insurance could be right for you. Proceeds from your policy can help your dependents live comfortably if you are no longer there to take care of them.
Figuring out how much coverage you need, however, might be a little tricky in some situations. For instance, most online insurance calculators have no options for aging grandparents or parents. However, for children, it is not complicated. Just enter the number of kids you have and their age; the software will do the rest.
Singles with elderly relatives can try this hack. Enter their information the same way you would a non-working partner. And do not forget to include their debts (if they have any).
You have a business partner
If you want to apply for a business loan, you probably will need to take out a life insurance policy first and name the lender as one of the beneficiaries. This ensures that the lender will get the money owed to them even if something were to happen to you.
A personal life insurance plan can also prove handy if you have launched a startup with a partner. If you die before you expect to, your business could suffer financially.
In business, people usually partner with someone who complements their skills. One partner might have experience in marketing and business development, while the other may be a technology expert.
Losing a key person can prove devastating for the company. The other partner may find it almost impossible to replace the deceased without considerable consequences to the enterprise. However, life insurance coverage could give the surviving partner some financial stability, allowing them to take some time to create a business roadmap for the future.
Considering all this, set up a plan for your business to deal with the untimely death of either of the owners. Work out the amount of money that would be needed to conquer the challenges that the business would face in the wake of a partner’s death.
Another problem to consider should one partner pass away, is the desire of the late partner’s heirs to come on board. This could be financially ruinous for the business, especially if the heirs lack the skill or passion needed to run a business.
Setting up the classic buy-sell agreement can help avoid a dispute between the surviving co-owner and the late partner’s family. The buy-sell agreement is a legally binding agreement, and spells out what is to happen if either of the owners passes away. Generally, it calls for the survivor to purchase the deceased’s share in the company at an agreed-upon price. If there are two partners, each buys a life insurance policy on the other. If one partner dies, the other uses the policy’s proceeds to buy the deceased’s share from his or her heirs.
You want to cover end-of-life expenses
A life insurance policy provides your family with an income replacement in the event of your death. The payout can help them maintain their standard of living after you are gone. When you are single with no dependents, traditional life insurance might not make sense for you. However, there is one expense you might want to plan for — your funeral.
In Canada, a funeral can cost anywhere between $5,000 and $15,000. And this, mind you, does not include other end-of-life expenses like medical bills. If you do not want to burden your loved ones with the cost after you pass away, plan for your funeral.
That is where burial or funeral insurance can come in. It covers the cost of the funeral and other end-of-life expenses.
The above scenarios demonstrate why single people need a life insurance policy. If you fit somewhere in the list, do not delay buying life insurance. Term life insurance is generally a better option for most people, thanks to its affordability and flexibility. However, in certain situations, a permanent life policy may give better, all-around protection. Speak to a Dundas Life expert today to get the best life insurance product for you.
Frequently Asked Questions
- Do I need life insurance in Canada if I am single?
If you have a spouse or children that rely on your income, you almost certainly need some form of life insurance. However, that does not mean single people without children do not require life insurance. There are several circumstances when having a life insurance policy might be the smart thing to do. For instance, if you are in a business partnership or have a co-signed debt, strongly consider buying a life insurance policy.
- Do you need life insurance?
Whether you are or married, ask yourself the following questions: Does someone depend on me financially? Do I have a debt that will fall on the shoulders of a loved one if I die unexpectedly?
If you said yes to either, you probably do need life insurance.
- What type of life insurance is more suitable for single people — Term or Permanent?
Unless you want life insurance to cover funeral costs or serve as a financial legacy, a term life insurance policy is likely to be a better option. It is cheaper, simpler, and provides coverage for only those years that you need it.