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Do you need life insurance plans even without dependents? Is life insurance worth it for folks with no dependents? Maybe. Burial costs are shockingly expensive and debts may need to be repaid. Life insurance solves both those problems and more.

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life insurance plans
It may be a drag to spend money on life insurance, but on’t leave your loved ones in financial straits at your death.

Do your friends mock you for shelling out money for life insurance?

If you’re young, healthy, and don’t have dependents, they might. And you might be inclined to agree. Likely that’s why only 60% of American adults have life insurance. Sure, it’s a drag to spend money on life insurance, but there are reasons to buy life insurance… even if you’re young, healthy and have no dependents.

Why? Because for one, if you unexpectedly pass, there’s a good chance that someone will be on the hook for your funeral and burial expenses. And then there’s the matter of your debt, any legal fees, a mortgage. It can add up. Plus, if you’re young and healthy, you can buy a lot of term insurance very affordably.

Say What…? It Costs that Much to Be Buried???

According to the National Funeral Directors Association, the median cost of a funeral and burial – your final expenses – is $8,500. Depending on your location, the funeral home, and funeral options chosen, the cost could be substantially higher. Shockingly, this price doesn’t even include a burial plot. which adds another $1,000 to $4,000 (or more). On top of that, there may be a $1,000 charge to open up the ground and close it again. Upright gravestones can cost $2,000 to $5,000. Caskets themselves run from a basic metal box at $2,000 or $2,500, all the way up to $5,000 or more.

Finally, most people are shocked and grieving at the point of purchase, so they struggle to do any kind of comprehensive search for funeral homes or compare costs. It’s not hard to ring up $20,000 on funeral and burial expenses. It’s also precisely a point in time where emotions run high and people are likely to spend more as an expression of their love.

Are Your Heirs Responsible for Your Debts?

Would your heirs be responsible for your debts? The short answer is: It depends. The number of things it depends on is beyond the scope of this article, but your debts become the responsibility of your estate when you die. Your estate includes everything you owned at the time of your passing.

The executor of your estate – the person responsible to fulfill your wishes, pay your bills, and pass on money or property to heirs – will tap into your assets to pay off your debts. If there’s not enough to cover your debts, collectors may be out of luck. But not always.

life insurance plans
Your debts can become the responsibility of your heirs when you die, especially certain debts.

Some Debts Can Become Another Person’s Burden

Your spouse is generally responsible for your debt if they:

  • are a joint account holder on credit cards or debt,
  • co-signed a loan (common with mortgages), or
  • live in a community property state with debts that were incurred while married. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

Different types of loans are treated differently. Student loans are discharged at death. Things like mortgages, home equity loans, and cars must be repaid . . . by someone. Creditors can’t go after your retirement accounts or life insurance benefits, but they can go after everything else.

Life Insurance: The Simple Solution for All of These Problems

Having a lump sum death benefit in place can solve the problem of burials and debt obligations. There are two basic life insurance types – term life insurance and whole life insurance. Avoid universal life insurance and variable life insurance.

Term Life Insurance

Term life insurance is more popular… probably because term life insurance rates are affordable and policies are easy to understand. Term life works similarly to other kinds of insurance. You pay a set monthly premium, and in return your beneficiaries get a set death benefit if you die during the life (or term) of your policy. We discussed term life insurance in more detail here, but it won’t do them a whole lot of good if your policy is only good for 30 years and you die in year 32.

Whole Life Insurance

Whole life insurance offers a death benefit and also a cash value as you make payments and contribute to the policy’s cash value. The cash value is for your use while you’re alive. It grows tax-free, you can borrow against it (and repay at competitive rates), or pay your premiums with it. Cash value is only available in whole life policies, also called permanent life policies. Unrepaid loans against it are typically subtracted from the death benefit if you die before it’s repaid.

Your life insurance rates for both term life and whole life are determined by factors like your age and health. Other factors include family health history and potentially risky occupations or hobbies.

How Much Life Insurance Do You Need?

It all depends . . . It depends on what you want it to do. Do these three calculations to decide.

If you have no dependents:

How much is needed to cover immediate expenses like funeral costs and your debt including cars and mortgages? Add up the numbers, don’t guess. This is critical even if you don’t have dependents.

If you do have dependents, ask these questions:

  1. How much income do you want to replace (especially important if you’re the family’s primary breadwinner)? Your premature death could put a serious strain on your loved ones.
  2. How much would it take to replace your income, or 80% of your income?
    What future expenses do you want to cover? This is important if you want to provide for your dependents’ high school or college tuition or weddings.

Consider your liabilities versus your assets to determine how much life insurance you need.

Is Life Insurance Worth It?

Life insurance can be used for a number of purposesm, including debt repayment, burial costs, and replacing income any dependents depend on. Fortunately, if you’re a young, healthy non-smoker, you’ll find term life insurance rates to be attractive enough to not be a big drain on your budget. If you have anyone depending on you, they’ll appreciate the love you show by providing in advance for their needs.

But even if you have no dependents, consider life insurance for funeral expenses and debt repayment. It relieves a financial burden and makes one less thing grieving family members will have to worry about. Even if your employer offers life insurance, we recommend you have your own independent policy. You would lose an employer policy if or when you leave that job. And if your health takes a turn for the worse, you won’t be able to buy it later. You can only buy a life insurance policy when you don’t need it yet (i.e. when you’re healthy). Don’t presume on the future by putting it off to some future point when you may be less healthy than you are today.

Your life insurance policy may have exclusions, particularly death from a pre-existing condition (like cancer) and suicide. Check your policy if it’s been awhile since you bought it. Look for these exclusions when you shop for a policy.

If you need a quote for term life insurance or a quote for whole life insurance, check with PolicyGenius or SelectQuote.

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