Why Should a Single Person Have Life Insurance?

Life insurance can be sold as a way to protect your immediate family and dependents from financial burden if you were to pass away unexpectedly. But people without a spouse and dependent children can also benefit from the advantages of life insurance. Insurance sales professionals and private individuals should understand why a single person should have life insurance.

Death Benefit

When an individual passes away, the state will determine how to distribute the assets of the estate if there is no executor. If your family decides to appoint an executor, then that executor becomes responsible for the debts of the deceased, according to Suzanne Badenhop writing for the University of Kentucky Cooperative Extension website. Those debts will include funeral costs. A single person will have post-death debts just as a married person would. In order to relieve the burden on the family and the executor of the estate, the single person needs to have life insurance.

Children

Single people are capable of having children, and that feeling of responsibility will cause the single parent to want to make provisions for his children. Regardless of the relationship that the individual is allowed to have with his children while he is alive, he can provide for the future of his children by having life insurance and naming his children as beneficiaries.

Savings

Whole life insurance has an investment portion that grows in value as long as the policy's premiums are paid, according to the insurance experts at the New York State Insurance Department website. As the individual is providing protection for her estate, she can also enjoy the benefits of the investment and savings portion of the life insurance policy. One advantage to the investment side of a life insurance policy is that it can be surrendered for a portion of the cash value if financial times get difficult. The portion that can be retained after surrendering the policy depends on the policies of the company. Surrendering the policy for cash value terminates the coverage. An individual can also borrow against the cash value of a life insurance policy while still leaving the policy in effect. Once again, the rules for borrowing against a life insurance policy vary by company. One common rule is that the portion of the loan that is not paid back will be subtracted from the death benefit upon the individual's passing.

Taxes

A whole life insurance policy allows an individual to have insurance coverage and save for retirement without having to pay current income tax. According to the experts at the New York Life website, all of the interest and earnings accumulated on a whole life policy are free from current income tax. Loans taken against the value of a policy are also not subject to income tax. You only pay income tax when you withdraw the cash value or surrender the policy.

References

• New York State Insurance Dept: Life Insurance - Top Ten Questions
• Bankers Life and Casualty Company: Benefits of Life Insurance
• Benefit House: Life Insurance Frequently Asked Questions
• New York Life: The Tax Advantages of Cash Value Life Insurance
• University of Kentucky Cooperative Extension: After Death . . . how to Settle an Estate: Suzanne Badenhop

Resources

• "Smart Money": Term or Whole Life?