Is life insurance worth it if you're single?

August 15, 2022

Life insurance is one of those things that nobody wants to deal with, like scheduling a dentist appointment, or having to tell the waiter that your burger is dangerously undercooked.

But at some point, you have to think about end-of-life situations and consider the impact your absence will have.

Since the purpose of life insurance is to provide a financial payout to your beneficiaries when you die (typically spouse/children), I've been asked a few times if it's worth paying for a policy when you're single.

Like most things in personal finance, it depends. In a general sense, you don't necessarily need it. But these are a few things to think about:

  • If you plan to get married or have kids in the future, getting a policy while you're younger and still single can save on the overall costs because insurance is generally cheaper the younger you are.  
  • For example, the average cost of a $500,000 20 year term life policy for a 30 year old man is $34/month and for a 50 year old, the same policy would cost $127.50/month (for standard applicants). That's more than a thousand dollar difference each year.
  • Also, the longer you wait, the higher the chance of something happening to your health that could drastically increase the cost of coverage, so locking in a low rate prior can make sense
  • If you have outstanding debts - such as private student loans, a mortgage, or credit cards - it can make sense to get a policy that covers the cost of paying these off so that your family has less to deal with after the fact
  • If you've maxed out all other investment accounts and have a large cash reserve, getting a life insurance policy can make sense as a way to store a portion of your wealth
  • If you want to remove the financial burden of end-of-life costs for family members - funerals aren't free, costing $7k-$12k on average. Also, hospice care or long hospital stays can end up costing tens to hundreds of thousands of dollars.
  • If you want to leave a legacy - even if you don't have a spouse or kids, you can set charities or other organizations to be the recipient of your policy's payout (or even other family members).

Life insurance makes sense for a lot of people, but you want to be sure that you understand the difference between term insurance and permanent insurance.

There are a lot of details that differentiate the two, but the main things to know are:

  • Term insurance only covers you for a certain term (like 10, 15, or 20 years) and then you'd need to get another policy when it ends
  • Permanent insurance generally lasts until you die, as long as you keep paying the high monthly premiums

Term insurance is a much better option for a majority of people because the costs are way lower and you can get millions of dollars in coverage for a fraction of the cost of permanent policies.

These are the average annual costs for just $500,000 coverage with permanent insurance:

Some popular, low-cost online brokerages to find term insurance are Lemonade and Ladder (no affiliation)

So overall, you don't necessarily need life insurance - but getting a term policy when you're single can make sense in a few different scenarios, especially if you can afford the relatively small cost.

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