Why You Need Life Insurance (Even if You Don’t Have Kids)

how much life insurance do i need

Once you start working and building your adult life, you have all new responsibilities and obligations. And that means you have to start thinking about morbid topics, like what happens to loved ones if you are not around anymore.

Many people do not get life insurance if they don’t have children, but it’s important to have a policy if anyone depends on your income. Below, what to expect when shopping for a policy and the answers to “do I need life insurance?” and “how much life insurance do I need?”

Who needs life insurance?

Once someone depends on you for your income – whether it’s a partner or an aging parent – you should consider a life insurance policy.

It’s especially important to have a policy when you’re young; since your career is just starting out, you likely have not built up enough savings, investment accounts, or home equity to provide for your loved ones if you pass away.

According to Nick Vail, a chartered retirement planning counselor with Integrity Wealth Advisors, life insurance is important for families.

“Even if you do not have children, you may wish to help your current or future spouse to pay off a mortgage or provide the funds to allow them to keep up their current lifestyle,” says Vail.

If your death would leave your partner or parent in a difficult financial situation, a policy gives you security and peace of mind.

For example, let’s say you have a partner and are a two-income household. You have a house together and joint expenses. and your incomes combined are enough to handle your bills and put a little away each month.

But if you pass away, your partner may not be able to afford the mortgage and other expenses on their own. If you have private student loans, you partner may still have to make payments on your debt. And in the weeks or months after your passing, they may be unable to work due to grief and the stress of making arrangements. That means they may lose your home and be in a really desperate situation.

A life insurance policy is an essential safety net in case the worse happens. It will allow your partner or loved one to grieve while providing for their expenses.

Where to find affordable life insurance

Buying affordable life insurance is easier when you are young and healthy, especially if you opt for a term life insurance policy.

“Many individuals fail to realize that it can get harder to obtain life insurance as you age. Getting it while you’re young, even if you don’t have children, can often mean locking in a better fixed rate for the long-term,” says Vail.

For example, the average annual cost for a $250,000, 20-year term life insurance policy for someone who is 35 and a non-smoker is $359.78. But if you buy a policy at 25, your policy will cost just $330.33.

To find a policy that fits your budget, check with your insurance provider for your renters, homeowners, or car insurance policy. Many companies offer significant discounts if you add a life insurance policy.

You can use Intelliquote to compare quotes from different providers to get the best deal.

How much life insurance do I need?

Many employers offer a life insurance policy equal to a year’s salary, but you shouldn’t rely solely on their policy to provide for your family’s needs.

“It’s important not to rely solely on group term or supplemental life insurance through your employer. If you choose to switch jobs or start your own business, you may not be offered the same life insurance benefits. Mixing in some private insurance can ensure that you will have that policy no matter where you work, as long as you keep up with your premiums” says Vail.

You likely will need more coverage than a year’s salary. To calculate how much life insurance you need, financial expert Suze Orman recommends taking how much income you need to replace and multiply it by 20.

For example, if your family needs $35,000 a year to live on, then multiply that amount by 20. You’ll need a $700,000 policy to cover your family in case of your death.

That formula assumes you have no substantial assets your partner or parent could use to pay for their living expenses. If you do have assets or investments, just subtract their total from formula total to get the total value you need.

Buying life insurance

No one likes to think about their own death or what their families would do without them. But planning now and preparing for the worst will ensure your loved ones are protected. It’s one of the most loving acts you can do for them.

If you’re thinking “how much life insurance do I need,” shop around and run the numbers to find the most affordable rates.

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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal LoansFixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 4.98% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 21, 2017 and are subject to change without notice. Not all rates and amounts available in all states. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 4.98% APR assumes current 1-month LIBOR rate of 1.34% plus 3.89% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 4.99% – 16.24% (4.99% – 16.24% APR) based on applicable terms. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
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4.98% - 14.24%1$5,000 - $100,000
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8.00% - 25.00%$5,000 - $35,000
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4.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
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