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Do I need life insurance?

The right policy can provide protection for your loved ones without breaking your budget.

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Life insurance isn’t one-size-fits-all, and the right policy for you will depend on where you’re at in your life. There are also a few situations where you might be able to do without life insurance — like if you have enough savings to self-insure.

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Do I need life insurance?

These people often have the greatest need for life insurance.

Someone with co-signed debt

  • To take care of their debt. Unfortunately, your debt doesn’t die with you. If you have co-signed debt, you might want to buy a policy that covers the cost – just in case you die before paying it off.

Breadwinner

  • To replace their income. If a breadwinner dies, their policy can kick in to help their family to pay for living expenses and maintain their lifestyle.

Business owner

  • To maintain cash flow. A life insurance policy can provide much-needed money and financial protection if a key player dies. It can also be used to fund buy-sell agreements.

Homeowner

  • To ensure their family can pay the mortgage. Many homeowners take out a term life policy that lasts as long as their mortgage. That way, if they die, their loved ones will have the money they need to make repayments.

Wealthy individual

  • To pay estate and inheritance taxes. If your estate is worth more than $11.58 million, the IRS threshold for 2020, it may be subject to federal estate taxes. A life insurance policy can give your heirs the money they need to cover those taxes.

Stay-at-home parent

  • To pay someone else to do the tasks they perform daily. Stay-at-home parents often do a lot of unpaid labor, like cooking, cleaning and ferrying the kids around. If they die, their life insurance policy can help their family to hire someone to take over those duties.

Who doesn’t need life insurance?

You might not need life insurance if these situations apply to you:

  • You don’t have any financial dependents. If you don’t have a partner, spouse, child, aging parents or anyone else relying on your income, you may not need a policy right now.
  • You don’t have any debt or major assets. Many people purchase life insurance to cover their outstanding debts and protect their assets — such as a house — when they die. But if you don’t have those kinds of financial obligations, you could hold off on buying coverage until you do.
  • You have the money to self-insure. If you have sufficient savings, healthy retirement accounts, assets and well-performing investments, you might be able to self-insure. This simply means that your loved ones would be able to pay for their living expenses and financial needs using the accounts and liquid assets you already have. Life insurance is designed to replace your income, but if you can provide your family with cash flow another way, you might not need a policy.

Should I buy life insurance for my child?

Since most parents don’t rely on their children financially, life insurance usually isn’t necessary — and a 529 plan may offer better financial protection.

However, there are a few cases where it’s worth considering buying a policy for your child:

  • Your child is the breadwinner of the family.
  • You have several investments in your child’s name.
  • Your child has a serious health condition, and you want to lock in life insurance at an early age.
  • You’re hoping to secure a low premiums while your child is young.

Is there a perfect age to get life insurance?

No. Many people get life insurance after a major milestone, such as having kids, buying a house, getting a new job or getting married. However, the younger and healthier you are the lower your life insurance rates will be. The level of coverage to buy will depend on your income, expenses and needs — and it might make sense to adjust your coverage as you age.

AgeLife eventsFinancial obligationsTypes of insurance to consider
18-25
  • Start full-time work
  • Move out on your own
  • Start accumulating wealth
  • Everyday living expenses
  • Small personal debt
  • Disability
  • Accident
25-35
  • Increase in income
  • Purchase a house
  • Increase in debt
  • Marriage
  • Children
  • Short-term debts
  • Spouse and children
  • Everyday living expenses
  • Mortgage
  • Life insurance
  • Disability
  • Critical illness
  • Accident
35-45
  • Increase in earnings
  • Reduction of debts
  • Outstanding mortgage and personal debt
  • Investments
  • Everyday living expenses
  • Retirement fund
  • Life insurance
  • Disability
  • Critical illness
  • Accident
45-55
  • Maximum earnings
  • Preparing for retirement
  • Less financial commitments as children move out
  • Outstanding mortgage and personal debt
  • Investments
  • Everyday living expenses
  • Retirement fund
  • Life insurance
  • Disability
  • Critical illness
55 and Over
  • Protecting your wealth
  • Retire from full-time work
  • Finance retirement with savings
  • Everyday living expenses
  • Any outstanding debts
  • Medical costs
  • Funeral Costs
  • Life insurance
  • Critical illness
  • Funeral or burial expenses

What types of life insurance are available?

The main types of insurance available are:

Alternative types of insurance

These types of coverage offer added protection for needs outside of a death benefit and may be useful in different stages of your life:

  • Disability insurance. The truest form of income protection, this kicks in to offer monthly benefits if you become fully or partially disabled and can no longer work.
  • Critical illness insurance. This coverage provides a lump sum benefit if you’re diagnosed with a critical illness that’s specified in your policy. Most policies cover up to 40 different conditions, including stroke, cancer and heart attacks.
  • Funeral or burial insurance. Designed to cover end-of-life expenses, this policy pays out a one-time lump sum benefit.
  • Accident insurance. These policies can help you cover medical and out of pocket costs if you experience an injury, some people even use these benefits towards their health insurance deductibles.

Why we like: Policygenius

Compare affordable quotes from 12+ A-rated life insurance companies side-by-side.

  • Compare multiple providers
  • Calculate how much coverage you need
  • Get a quote in 2 minutes

Compare affordable quotes from 12+ A-rated life insurance companies side-by-side.

  • Get the coverage amount and term that's right for you.
  • Choose between term or whole life insurance.
  • Easy online application process.

Compare life insurance companies

Name Product Issue Ages Minimum Coverage Maximum Coverage Medical Exam Required
Bestow
21 - 54 years old
$50,000
$1,000,000
No
Affordable 10- and 20-year term life insurance policies with instant quotes and no medical exams.
LadderLife™ Life Insurance
20 - 60 years old
$100,000
$8,000,000
No
Term life insurance with no policy fees and the freedom to cancel anytime. Simple application process that can get you approved for coverage instantly.
Policygenius
18 - 85 years old
$10,000
$10,000,000+
Depends on provider and policy
Compare affordable quotes from 12+ A-rated life insurance companies side-by-side.
Haven Life
18 - 64 years old
$100,000
$3,000,000
No
Customized term life insurance policies up to $3 million, no medical exam for certain applicants.
Fabric
25 - 60 years old
$100,000
$5,000,000
No
Get affordable term life insurance with accelerated underwriting or no-exam coverage up to $1,000,000. Available in all states except CA, NY and MT.
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Compare up to 4 providers

What to consider when buying life insurance

When you’re deciding how much coverage to buy, consider the following.

  • Number of financial dependents. Tally up how many people depend on your income, and how much it’ll cost to keep them afloat once you’re gone.
  • Length of time your dependents could go without your income. You’ll want to add up how long your family could go without your income and consider an amount that could take care of them once they run out of money.
  • Length of time until your children are financially independent. Keep in mind how much your kids might need to survive before they become financially independent.
  • Financial assets. Keep in mind which other financial assets you may leave behind that could help take care of your family.
  • Amount of debt. Calculate the amount of debt you’re leaving being so that it can be taken care of if you die before your debts are settled.
  • Business needs. Consider how your business may run in your absence and which financial assets.

Should I buy life insurance if I’m retired?

As you inch closer to your retirement, you’ll likely have less financial obligations and therefore, less of a need for life insurance. But a life insurance policy after you retire can help you to:

  • Leave an inheritance to your children or loved ones
  • Pay for funeral expenses, legal fees or taxes
  • Cover any outstanding debts

Ask an expert: How important is life insurance if I already have healthy savings and retirement accounts?

Jackie Morales

Jackie Morales

Chief Insurance Officer of Bestow

Life insurance, health savings accounts and retirement accounts are all designed to serve different needs.


Health savings accounts. Whether it’s a Flexible Spending Account (FSA) or a Health Savings Account (HSA), these vehicles offset the cost of health insurance deductibles. Unlike an HSA which can be accumulated in one year and “banked” for future use, FSAs have to be used for expenses incurred during the calendar year in which the funds were accumulated. In most cases, the amount of money that can be accumulated in either account would not be enough to provide the kind of protection the next two types of policies would.

Retirement accounts.These are intended to be used while a person is alive. They offer a flow of income during a person’s retirement to allow them to maintain their lifestyle when they’re no longer working.

Life insurance. This protects against the untimely death of a person whose income is needed by their beneficiaries. Money can never replace the loss of a loved one, but it can create the time and economic security needed for someone to make future decisions.

Ask an expert: How important is life insurance if I already have healthy savings/retirement accounts?

Head shot of Scott Smith, President & Chief Operating Officer of Vantis Life

Scott Smith

President & Chief Operating Officer of Vantis Life

Life insurance is a very important part of any good financial plan. When you solely rely on growing your savings either via a retirement account or any other financial savings vehicle, you’re counting on the idea that you’ll live long enough to be there to fund that account.

In addition, there are usually tax consequences when accessing money from retirement funds. But with life insurance in place, a beneficiary is guaranteed 100% of the death benefit tax-free, and there is no need to go through or wait for the probate process to take place.

Life insurance is the best way to replace income lost due to an unexpected death.

How much life insurance do I need?

Once you’ve determined a need for life insurance, the next step is figuring out how much coverage to buy.

To crunch the numbers, add up the cost of your financial obligations and assets, including DIME: Debt, Income, Mortgage and Education. Then, aim to take out a policy with a face value to match.

Another simple way to calculate coverage is to multiply your annual salary by five or 10. So, if you currently earn $50,000, you might buy a $250,000 or $500,000 policy.

Bottom line

If you have children or loved ones who depend on you financially, a life insurance policy can help to provide for them when you’re no longer able. Compare life insurance policies from different insurers to find the coverage that best suits your needs and budget.

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