Life Insurance Makes a Difference When You're Young and Single
By Pekin Insurance · Jan 13, 2020 ·3 min read
We can’t tell you what to do. But when you’re young and single, life insurance could really help the people who matter to you.
Insurance companies spend a lot of money getting your attention. That’s ok. We’d rather have a conversation without the marketing buzz.
What Does "Single" Mean?
From a social perspective, “single” could mean:
- You aren’t in a relationship or looking for one.
- You’re dating, but not seriously.
From a legal perspective, “single” means you aren’t married.
How Life Insurance Works
Here’s the easiest way to describe how life insurance works:
- You apply for coverage from an insurance company.
- You might have to take a quick medical exam depending on what coverage you choose.
- You name beneficiaries who receive money for a qualifying life insurance claim.
How do they get the money? That’s the tricky part. See, you have to die first.
It’s not all doom and gloom, though. Keep reading to see the impact you could make with life insurance.
Is Life Insurance Affordable?
The 2018 LIMRA Life Insurance Barometer Study says 44% of millennials overestimate the cost of life insurance by 500%.
Chances are, life insurance is more affordable than you think it is. It all boils down to your financial obligations and what you want to leave behind.
A Pekin Insurance agent will help you create a plan that fits your budget.
How to Pay Off Student Loans
Ouch! Your bank account feels the pain when you think about student loans.
Who will handle those debts after you pass away?
Federal student loan debt is usually canceled when a person dies before paying it off. Private student loans don’t work like that. A co-signer would pay it off in a worst-case scenario.
Think about a term life policy as a back-up plan for your college debt. With term life, you have coverage for a set amount of time like 10 years.
Term life coverage serves two purposes:
- It’s an affordable way to start a financial plan.
- It can protect your loved ones if they inherit your debt.
What Happens to Your Mortgage?
The Balance says the average monthly mortgage payment falls somewhere between $1,022 and $1,505. That’s $12,264 to $18,060 per year.
Would your family be able to make house payments if you suddenly left the picture?
They would take on the mortgage if they took over the property. If you have a cosigner, they'd have to pay off the debt or sell the home.
Life insurance could take the pressure off your loved ones by wiping out your mortgage. Even if you don’t own a home, this is something you should keep in mind for the future.
Leaving Your Children an Inheritance
Single parents could really use life insurance for school supplies, clothes, tuition, groceries, and too many things to list here.
Don’t name your child as a beneficiary, though.
A minor can’t receive a life insurance benefit. If you don’t name an adult guardian for the benefit, the insurance company might have to go to court to appoint that person.
The proceedings take time and require attorney fees.
A Pekin Insurance agent can help you set up a Uniform Transfers to Minors Act (UTMA) account. This will appoint an adult custodian for life insurance funds
You have other options like setting up a living trust and naming it as the life insurance beneficiary.
How Important Is Family Medical History?
Does your family medical history include cancer or heart disease? That’s a good reason to apply for life insurance earlier in life.
Your rates are lower when you’re younger and healthier, and they go up as you age.
You Start a Business With Some Friends
You and your friends could sell Air Jordans online, but you still have inventory. Did any of you take out a loan to market your business and get it off the ground?
If you have business partners who co-sign on loans, they're responsible for the entire debt when you die. A buy-sell agreement could solve this problem.
In a buy-sell agreement, owners of the business purchase life insurance policies on each other. When an owner dies, the policy’s benefit is used by the remaining owner to buy the deceased owner’s portion of the business.
A buy-sell agreement:
- Guarantees a buyer for business assets.
- Provides a smooth transition of ownership, management, and control to those who are going to continue running the business.
- Can establish a value for federal estate tax purposes.
- Spells out the terms of payment and is easily funded with life insurance.
A Way to Avoid a Crowdfunded Funeral
Take a look at these average funeral costs from the National Funeral Directors Association (NFDA):
- $6,585 – cremation
- $8,755 – traditional burial with a cemetery vault
You can pay for final services with life insurance, and it's a great way to avoid a crowdfunded funeral.
Are you asking, "How does that even work?" Someone, probably a family member, would set up an online fundraiser for your funeral costs. They'd share a link to the fundraiser through social media and private messages.
You don't have to follow this route, though. A crowdfunded funeral puts financial pressure on friends and family. Plus, there's a possibility of not hitting the goal.
A Final Gift for Charity
Do you want to support a cause as your final act?
Here are two easy options for creating a charitable gift with life insurance:
- Help a charity purchase a policy on your life, with the charity named as owner and beneficiary.
- Purchase the policy and name the charity as the beneficiary.
What does your local Pekin Insurance agent offer? They're licensed, and they know the ins and outs of life insurance. They're a great resource for setting up the best plan for you.