Some financial advisors do not recommend life insurance for single people without dependents. Initially, it appears that life insurance might not be the most relevant financial protection product for a young, single person without dependents. However, changes in circumstances are inevitable. As such, a person who fits the profile in question might need life insurance in the future. Also, insurance is not the type of product that you can purchase whenever you can afford it. Therefore, it might be a prudent to acquire adequate life insurance while you can. The following are the most important reasons why a young, single person should acquire life insurance now:
1) Affordability
When you are younger, the premium rates for life insurance are lower. This reflects the lower risk posed by younger people based on the concept of life expectancy. However, it wouldn’t make sense to purchase it simply because it is cheaper now. Any purchase or investment should have value to the customer. If there is the slightest chance that life insurance may be valuable in the future, purchase it now.
2) Final Expenses
Although you’re young anf single, in the event of your death, your immediate family might be responsible for your final expenses. If you prefer not to burden them (or your small estate) with debt or funeral expenses, life insurance could yet play a role in your financial plan.
3) Insurability
This refers to the likelihood that an insurer will accept your offer to be insured. Insurers have the choice of accepting your offer as it is, increasing your premiums due to elevated risk or denying your application if you are deemed uninsurable. If you defer purchase of life insurance, there’s a chance that your offer may be rated or denied. To wait until you’re older is to gamble on your insurability.
4) Cash values
With cash-value life insurance plans, you would accumulate far more at an earlier age if you take the life insurance plan earlier. For example, with a Universal Life plan, the savings portfolio would be working for a longer period if you start earlier. You would benefit from compounded interest and be able to have high cash values available at an earlier stage in your life.
5) Forced savings
Quite a few young persons are notoriously irresponsible with their finances. Purchasing cash-value life insurance for the young, single person is one way of ensuring that the act of saving takes place at that juncture. Universal Life plans are the best type for forced savings, since they typically have an independent savings plan embedded in them.
6) Business/ mortgage purposes/ estate planning
Life insurance is not only for dependents that you do not have as yet. Life insurance plans are sometimes necessary for business transactions and mortgages. If you plan to be single without dependents for life, you may still need life insurance for purposes such as these. It is never too early to begin estate planning either. Life insurance both creates an estate and protects what you have already. So if you acquire dependents later on, your estate would already be secured for their benefit.
7) Change in circumstances
It is important to realise that your circumstances can change quite easily. One year, you could be single without children and a couple years later, you could have a partner/ spouse and a couple of dependents. Since you cannot always predict the future, it would be useful to have coverage even if you are young and single.
Permanent life insurance for a young, single person might be of great utility. This is primarily because cash-value life insurance plans would enable forced savings. A Universal Life plan with its savings portfolio attached would be a meaningful addition to your financial pyramid. A useful coverage level would be at least five times your annual salary as a young, single person. It is primarily uncertainty about the future that forces us to be prudent. More times than not, it would make sense to buy life insurance now if you are young, single and not clairvoyant,