I'm Single, So Why Do I Need Life Insurance?
Whether or not to purchase life insurance is an important financial decision, and simply being single should not cause a person to discount the potential value of life insurance policy. According to the United States Automobile Association (USAA), the number one myth about life insurance that can cause significant financial hardship is that "Single and Young People Don't Need Life Insurance"
While not everybody needs to buy life insurance, many singles are realizing that a life insurance policy can be an important part of both estate planning and ensuring that their surviving family members are not burdened with debt. In most states the next-of-kin are held responsible for any consumer debt that exists at the time of a person's death, meaning that grieving parents or siblings could suddenly be forced to pay thousands of dollars to their loved one's creditors
How Much Life Insurance Do I Need?
As a general rule of thumb, a life insurance policy for a single person without dependents should at least cover any debts like credit cards, car and student loans as well as final expenses like funeral costs. Many single people who are choosing to buy life insurance today are doing so because they have seen the financial devastation that can result when an uninsured family member dies suddenly.
Beyond this basic amount, many people determine the amount of coverage they want based on the needs of the who the policy is payable to, known as the beneficiary. Singles who are planning on starting a family may want to purchase a larger policy while they are subject to lower premiums as a way to provide coverage for any dependents they may have in the future.
Buy Now, Save Later
One of the biggest advantages of buying a life insurance policy early in life (while many people are single) is to lock into low premium rates that will remain stable throughout the life of the policy. Purchasing life insurance coverage for a person who is in their 20s and 30s is far more affordable than it is for older people because risk factors like health and medical history usually increase with age. Most life insurance policies allow for changes the beneficiary, allowing a young single person to buy life insurance at a low rate and change the policy to provide coverage for any future dependents.
Life Insurance For Singles-Who To Designate As The Beneficiary?
While people who are married and/or have children usually designate their spouse and children as the beneficiaries of their life insurance policies, single people have many choices about who to leave their life insurance benefits to [http://www.iii.org/articles/what-is-a-beneficiary.html].
Most policies allow numerous beneficiaries to be named, giving policy holders the opportunity to dispense the payout to a variety of family members, friends, charities or an estate. Here are some of the ways that single life insurance policy holders can designate their beneficiaries:
Create A Trust Fund
Many singles have nieces and nephews who they choose to designate as their beneficiaries for the idea of providing funds for post-secondary education. If a minor is named as a beneficiary then a legal agreement known as a trust is required, otherwise, the insurance company will hold the funds until the minor reaches the age of 18 [http://www.insure.com/articles/lifeinsurance/child-beneficiaries.html].
A trust fund can also be a good way to designate a special-needs sibling as the beneficiary of a single's life insurance policy. Trust funds for people with special needs are covered under federal law and can benefit people with physical and/or mental disabilities.
Provide Funds For Elder Care
As the population ages and increasing numbers of adult children are left responsible for the care of their elderly parents, many single people are designating all or part of their life insurance policy to their elderly parents to pay for their care.
If the absence of the caregiver would leave the elderly parents in need of professional care in a nursing home or similar facility a life insurance policy on the caregiver would provide them with the knowledge that their parents would be provided for.
Make A Charitable Donation
An alternative to naming a friend or relative as a beneficiary is to designate the life insurance policy death benefit to a charitable organization. Many single people are strong supporters of charities like hospices, youth groups and animal welfare services [http://www.forbes.com/2010/06/28/life-insurance-charity-personal-finance-insurance-donation.html].
Designating a non-profit organization as either the sole beneficiary or a co-beneficiary on a life insurance policy is a popular way for many people to create a legacy for themselves [http://www.roifinancialgroup.com/Charity-Can-Begin-with-the-Gift-of-Life-Insurance.c2517.htm]. Most large non-profits have experts on staff who can advise donors on the various options available for gifting a life insurance payout to a charity.
Other Considerations
Along with purchasing the right amount and type of life insurance, single people need to ensure that basic estate planning is completed. This includes creating and maintaining a current will, power of attorney and living will.