Who does not need life insurance?
If no one is dependent on you financially, then you do not need life insurance.
You do not need life insurance if:
– You are a young, single person without any private loans
– You do not have kids or any other dependents
– Basically, if no one would suffer from your death financially, then you do not need life insurance.
If you need life insurance, what type should you get?
There are a several types of life insurance options, but there are basically two categories of life insurance: term and cash value.
Term insurance is only insurance (not a savings vehicle; you just pay for your insurance and that’s it). You pay a monthly premium in return for a lump sum payment if you die during the length of the term. If you don’t die, at the end of the term, you get nothing. It’s good for a number of years and after the term, it goes away. As you get older, it costs more to have term insurance. The policies are usually inexpensive at first, however (about $25-35 / month).
There are two over-arching types of cash value insurance: universal and whole (each has several spinoff options). With cash value policies, you pay higher monthly premiums in exchange for permanent lifetime coverage. Cash value is about 20 times more expensive than term insurance! Cash value life insurance has a tax-deferred savings component.The money above and beyond your insurance premium goes into a savings account. This sounds great, but the savings vehicles that you are quoted end up not being that great due to all the fees that insurance companies charge. Your rate of return on an average universal policy is 4.7%! This is not a good long-term investment. Further, when you die, the company pays the face value of the policy. The money you saved, at 4.7%, is kept by the company. So, the savings account has a low rate of return and when you die the company keeps your money!