Life insurance is important, but it's not always clear who needs life insurance or how much coverage makes sense. But if something unexpected happens to you, would your family be able to cover expenses, pay off debt, stay in their home, and plan for the future?
Coverage isn't just for parents or retirees — it's a tool that can provide financial security at any stage of life. Whether you're just starting your career, considering buying a home in the next few years, or planning for the future, the right life insurance policy can help protect the people who matter most.
Who should buy life insurance?
Life insurance isn't just for one type of person. It's a financial tool that can help protect your family, home, or business. While everyone's situation is different, certain life events and responsibilities make having life insurance coverage especially important.
So, do you need life insurance? Here are some instances where it may make sense.
Parents of young children
Raising a family comes with big financial responsibilities. You must consider everything from daily expenses to long-term goals like college tuition. If something were to happen to you, life insurance can help ensure your children are supported financially, covering the cost of childcare, education, and even future milestones like weddings.
Life insurance can also help a surviving parent maintain their current lifestyle and avoid significant financial strain.
Stay-at-home parents
Even if you don't earn an income, a stay-at-home parent's contribution to the household has significant value. From childcare and household management to cooking and transportation, the cost of replacing these services can add up quickly.
Life insurance for parents can help cover these expenses, so your family doesn't struggle to adjust financially without you. This type of coverage ensures a surviving spouse or guardian has the resources to provide for your children's needs.
Small business owners
Owning a business means taking on financial risks, whether it's business loans, employee salaries, or future expansion plans. If something happened to you, what would happen to your business?
Life insurance can help cover outstanding debts, ensure a smooth transition for partners or employees, and prevent financial disruptions. Many business owners use these policies as part of buy-sell agreements, allowing co-owners to buy out the deceased partners' share and keep the business running.
Couples without children
Even if you don't have kids, life insurance can provide financial protection for your partner. Think about shared financial responsibilities like rent, mortgage payments, or joint debts. If one partner passes, life insurance helps the surviving spouse better handle these costs alone.
Some couples use life insurance to leave a financial legacy, support aging parents, or donate to causes they care about. Even if you don't have children now, life insurance can provide flexibility for the future.
Retirees
Many retirees assume they don't need life insurance, but it can still play a key role in estate planning. Life insurance can help cover final expenses, outstanding debts, and medical costs, so your loved ones aren't left to cover unexpected bills.
If you have assets to pass down, life insurance can provide liquidity for estate taxes or create a financial cushion for your heirs. Some permanent policies can provide cash value which could be used to supplement income in retirement.*
Young adults
Many young adults don't have major financial responsibilities yet, but buying life insurance early has long-term advantages. Policies are typically more affordable when you're young and healthy. For example, a healthy 25-year-old could lock in a 20-year term policy for far less than waiting till their 40s — when the same coverage could cost double or triple.
Locking in a low premium now can save you money over time. Plus, getting covered early ensures you have protection before major life changes — like marriage, home ownership, or starting a family — when having coverage may be important.
Newlyweds
Starting a life together often means merging finances, sharing responsibilities, and planning for the future. If something were to happen to you or your spouse, would the surviving partner have financial stability?
Life insurance can help cover shared expenses, from rent or mortgage payments to student loans and other financial obligations. It also helps ensure your partner has a financial cushion during a challenging time.
Homeowners
A home is one of your biggest financial commitments, and a mortgage is often a long-term responsibility. Life insurance can help provide funds, so your family isn't forced to sell or relocate if something happens to you.
Instead of struggling to make mortgage payments or worrying about losing their home, your loved ones could have financial support in place to help cover some of these housing costs over the long term.
Determining whether you need life insurance depends on your situation. If you're still weighing your options, you can read more questions around life insurance to see how coverage might fit your financial plans.
How much life insurance do I need?
The right amount of life insurance depends on your financial situation. Everyone has different circumstances and needs, but a good rule of thumb is to consider your income, debts, and future expenses, like housing payments, college tuition, outstanding debts, and daily living costs for your loved ones.
Many people assume coverage is expensive. However, people overestimate the cost of life insurance. In reality, it can be much more affordable than expected, especially if you buy coverage earlier in life and are healthy. Here are some factors to consider when determining coverage:
- Your income — How many years of income would your family need to replace? Considering having enough coverage around 5-10 times your annual salary.
- Outstanding debts — Add up your mortgage payments, student loans, car notes, personal loans, or credit card balances that your loved ones would need to manage.
- Future expenses — Think about financial commitments like college tuition, childcare, or supporting aging parents or a disabled family member.
Some people calculate life insurance using the DIME formula (debt, income, mortgage, education). This approach helps you consider if your policy covers these major financial responsibilities like debts, lost income, and future educational costs.
A life insurance calculator can also help you run the numbers to estimate your coverage needs. However, speaking with a financial professional can help ensure you strike the right balance between affordability and protection.
Term vs. permanent: How does it impact coverage
The type of life insurance you choose can affect the coverage you need. Here's the basis on how they compare:
- Term life insurance — Provides coverage for a specific period, like 10, 20, or 30 years. It's often more straightforward to set up and the most affordable option for those looking to replace lost income.
- Permanent life insurance — Coverage, such as whole life or universal life, is designed to last for the rest of your life and may include a cash value component, which could make it an option for those looking at building long-term financial security.
As you plan for your life insurance needs, it helps to understand the difference between these options. For example, while permanent life insurance can cover you for the rest of your life, it tends to be more expensive than term life insurance.
Who doesn’t need life insurance?
Life insurance is valuable for many, but some may not need coverage. If you're asking, should I get life insurance? The answer is you may not need a policy if you have no dependents or shared financial obligations and enough savings to cover end-of-life expenses or outstanding debts.
For example, if you're retired with significant savings and have no financial commitments tied to others, life insurance may not be a priority. However, for most, especially those with families, homes, and businesses, it's a key part of financial planning.
When to get life insurance
No matter your stage in life, it's never too early to explore ways to buy life insurance and find a policy that fits your needs. In many cases, the sooner you get covered, the more affordable your options are.
Here are some of the best times to explore ways to buy life insurance and ensure you have the right protection in place:
- When you start your career — Even if you don't have dependents, locking in a policy early can help you secure rates and long-term financial protection. Some policies also build cash value over time, making them potentially a useful financial tool for the future.
- When you get married — Life insurance can provide financial security for your spouse in case something happens to you, ensuring they aren't left with shared debts or financial uncertainty.
- When you have children — Growing your family means additional financial responsibilities. Life insurance can help safeguard your child's future.
- When you buy a home — A policy can help ensure mortgage payments are covered so your family doesn't have to move or take on the extra financial strain.
- When you start a business — Business owners can use life insurance to protect their company and help provide continuity for partners or employees.
- When your employer-sponsored coverage isn’t enough — The coverage you have through your job may not be enough for your needs or follow you if you leave. Supplementing it with a personal policy can provide more protection.
- As you get older — Life insurance premiums for new policies increase with age, and health conditions can affect eligibility. Over time, your options may become more limited. Securing coverage earlier may help you lock in lower rates for future protection.
What happens if you have no life insurance?
It's common to question why life insurance is important. Understand that it helps provide a financial safety net for your loved ones. Without it, they may face strain or challenges if something unexpectedly happens to you.
No one likes to think about worst-case scenarios. However, preparing in advance can make a difficult time easier for your family. If you're asking yourself why do I need life insurance, here are some examples of what could happen without coverage:
Financial burden on loved ones
Without life insurance, your family may have to cover everyday expenses, medical bills, or final arrangements on their own. If you were the primary earner, your spouse or dependents may struggle to manage ongoing bills, rent, or mortgage payments.
Instead of worrying about finances during an already stressful time, life insurance helps you provide a financial cushion for your loved ones.
Loss of income
If your household relies on your income, your spouse, children, or other dependents may struggle to maintain their current lifestyle. Even if you have some savings, they may not be enough to replace years of lost earnings. This could mean having to move, take on additional jobs, or cut back on future plans.
Life insurance can help your family keep financial stability and cover essential expenses like groceries, housing payments, healthcare needs, and education.
Debt repayment
Outstanding debts, like a mortgage, car loan, or student debt, don't disappear if something happens to you. Co-signers or family members may be responsible for these financial obligations. If you and your spouse took out a mortgage together, or your parents co-signed your loans, they could still be required to continue to make payments.
A life insurance policy can help cover these outstanding balances so your family doesn't have to dip into savings or take on unexpected debt.
Lack of financial security
Beyond immediate expenses, life insurance can help provide long-term stability. Without coverage, your loved ones may need to adjust their financial plans, delay major life goals, or face difficult financial decisions. For example, a spouse who planned to retire may have to continue working, or a child's education savings may be needed for living expenses instead.
With life insurance, you help your family keep more financial independence and plan for the future without facing some of these hard decisions.
Takeaways
Life insurance is one of the most effective ways to provide financial security for your loved ones. Whether you need it depends on your circumstances, but for many, it offers protection against the unexpected.
Does everyone need life insurance? Not necessarily, but it offers key benefits. If you have financial responsibilities, shared debts, or loved ones who depend on you, life insurance can help provide a safety net. The key is to explore your options and find the coverage that fits your needs and budget.
Even if you're not sure what coverage you need, consider getting a quote or speaking with a professional to help you find an option that fits your budget and lifestyle.
*Unpaid loan balances and withdrawals reduce the policy's death benefit and cash surrender value. Withdrawals are taxed as ordinary income to the extent they exceed policy basis.
WEB.6304870.01.25
