When Should You Buy?
(Last updated on March 24, 2003)
Your need for life insurance changes with the stages
of your life, starting with no need when you're young,
progressing to greater and greater need as you take on
more and more responsibility, and finally beginning to
diminish as you grow older.
When you're single
Sad though your death would be, it's unlikely it
would create financial hardship for anyone. Any honest
financial assessment of your situation would have to
conclude that you have little or no need for life
An argument could be made that you should buy a
policy now while you're young and rates are low. And if
someone -- a parent, say -- depends on you for financial
support, then by all means, consider life insurance.
But consider the interest you could earn by saving
and investing your money instead of spending it on
insurance premiums. Still, if somebody -- a parent, a
grandparent -- wants to buy you a policy now to lock in
low rates for later in your life, accept it
Love and marriage
Married couples with no children may need little or
no life insurance, especially if both spouses contribute
equally to the household income.
The death of either spouse would not be financially
catastrophic; the other could presumably survive on his
or her own income.
Still, it could be a strain. Perhaps the survivor
couldn't afford the mortgage or rent payments on a
single income, or maybe you have big credit card debts.
Also, there would be funeral costs.
Each of you should probably buy a modest amount of
life insurance to protect the other.
Married with children
A one-income family with young children is the
classic high-need situation. Basically, all of these
people are dependent on one breadwinner for their total
support, so insurance on that life is vital. And if the
non-earning spouse should die, the other would have to
pay for child care -- a very expensive proposition that
argues for insurance on both lives.
This same high-need situation exists for dual-income
households with children, for single parents, and for
those caring for elderly parents who have limited
resources of their own.
The golden years
The kids have grown and are making it on their own.
You have a pension and considerable assets that can be
used to generate a good income after you die. In
circumstances like this, you clearly don't need as much
life insurance as you once did.
The one caveat here is estate planning. If your
estate is large enough to be subject to the estate-tax
when you die (that is, if it's above $1 million), your
heirs can use the death benefit to pay the IRS. If the
policy is held by a trust, the benefit would not be
counted as part of your estate.
If you fall into this category, consider a whole-life
policy. Since you don't know when you will die, you'll
need to hold on to your coverage indefinitely.
All contents ©
2004 The Kiplinger Washington Editors, Inc.