Getting life insurance makes absolute sense—if you're a parent. It's a way to keep providing for your children if something were to happen to you unexpectedly. But if you don't have children or any other dependents, you may wonder whether life insurance is really necessary.
Amy Lins, vice president of enterprise learning at Money Management International, has pondered this issue in her personal life. She and her husband married later in life and don't have any children. He's self-employed, while she has an office job—but he's six years older and will likely retire first.
When it came to life insurance, Lins—whose work involves counseling people on fiancial planning and money management—explains that she and her partner "definitely had a lot to think about."
Whether or not to get life insurance if you don't have children is a decision many couples grapple with. Lins explains that, in general, fewer people, childless or not, are purchasing life insurance these days—likely because they don't think they need it, they don't understand it, or they don't think they can afford it.
In 2020, 54 percent of Americans were covered by life insurance—almost 10 percent lower than a decade ago, according to consulting firms LIMRA's 2020 Insurance Barometer Study. Though, the coronavirus crisis led more people to look into getting life insurance.
While Lins and her husband opted to get life insurance in the end, she says the decision is a personal one that should be based on several factors. If you don't have children, here are some questions to ask yourself to decide whether or not you need life insurance.
Could you support yourself if your spouse died unexpectedly?
The purpose of life insurance is to replace a loss of income, so your family or partner is supported and can continue their lifestyle if you die prematurely, says Cathy Jones, associate director and financial planner at Edelman Financial Engines.
Life insurance is necessary for some couples. Many couldn't cover their living expenses if their spouse were to die prematurely, Jones explains. One partner may earn significantly more than the other, and the loss of that higher income would be devastating to the surviving partner.
However, if you've accumulated significant wealth, and each spouse could fully support themself and maintain their lifestyle if one person were to die, you could forgo life insurance.
"If no one would suffer due to your loss of income, then it's worth exploring if it makes sense to skip it," Jones says. Though, she suggests considering a small life insurance policy to cover costs such as funeral arrangements.
Is anyone else depending on you?
Thinking about who else, besides a spouse, depends on you should factor into your life insurance decision, Lins says. Are you caring for elderly parents or a disabled adult sibling? Do you have shared debt, like a joint mortgage with a family member? If so, life insurance can lessen the financial blow of your death.
Another scenario to consider is if you're a business owner, or have a business partner or others who depend on your business income. Lins says life insurance for all owners or partners of a business could keep it going during a transition period.
If your untimely death wouldn't cause loss of income for anyone, life insurance likely isn't necessary.
"If you do not have any dependents and don't plan to, or no one else in your family depends on your income—whether it be through joint expenses like a mortgage or shouldering shared debt—you typically don't need it," Jones says.
How much debt do you have?
Even if you don't have any dependents, think about whether someone has co-signed for any of your debts, such as a private student loan, car loan, or credit card. Lins says except for federal student loans, it's rare for debts to include death discharge clauses, which wipes away your outstanding balances.
"A co-signer may be legally obligated to repay the debt if the primary borrower dies," she says. "You don't want to leave a friend or family member with an unexpected financial burden."
Even debt that isn't co-signed could become a burden for others. Whoever becomes the executor of your estate will be faced with paying off your debts from the proceeds of your estate. In some states, a surviving spouse might be obligated for their partner's debt.
A life insurance policy could cover these debt obligations, Lins says. She recommends talking to an estate planner or attorney about your debt, how it might affect others in your life, and whether or not life insurance is necessary. If you're debt-free, you may not need life insurance.
Do you need long-term care insurance instead?
Life insurance covers the financial needs of anyone you leave behind when you die. But if you need significant care as you age, long-term care insurance could help. Bill Unrue, CEO of insurance-tech platform Ensight, says this kind of insurance is becoming more popular.
"It's a way of protecting yourself down the road if you need care that helps you as you age," he says. Long-term care insurance covers nursing home, assisted living, or home health care costs not typically covered by health insurance premiums.
If you plan to have significant savings to cover these costs or expect to qualify for Medicaid to pay for it, you may not need long-term care insurance. Otherwise, it may be a better bet than life insurance or in addition to life insurance.
Are any life changes looming?
The earlier you buy life insurance and lock in a rate, the better, as policies become more expensive as you age, Jones says. If there's even a chance that you might have children or gain dependents in the future, she suggests considering life insurance.
Every aspect of financial planning, including evaluating your life insurance needs, is a process that should be ongoing as your life progresses. Every few years, it's a good idea to revisit your insurance needs.
"Over time, family members are born and pass away," Jones says. "Your marital status changes. So does your health, income and occupation—even your attitude about heirs."
Lins recommends sitting down with a financial or estate planner to talk through these issues, whether life insurance is a good fit, and the kinds of policies available to you.
"Don't get overwhelmed; just take it one step at a time and look for a reputable flat-fee financial advisor or estate planning attorney in your area to help explain your options," she says.