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Do You Need Life Insurance?


The Answer Depends on Several Factors

The benefit of your loved ones receiving a payment should you die unexpectedly may sound appealing, but is life insurance really necessary? Is it worth paying a premium when you’re at a low risk of dying anytime soon? Like many personal finance topics, the answer depends on your unique situation.

In short, it’s probably wise to have life insurance in place if your unexpected death would negatively impact your loved ones. If any of the following situations apply to you, you may want to consider implementing a life insurance policy.

You have loved ones who depend on your income – If you’re married, would your spouse be able to pay for household expenses, mortgage or rent payments, student loan debt, etc., without your income? If you have minor children who are unable to provide for themselves, how would your loss of income impact them? If you have an older child with a disability, would he or she be able to access necessary services, care and housing without your financial support? If your family members depend on your income, it probably makes sense to have a life insurance policy in place to provide for them should the unexpected occur.

Someone else is on the hook for your debt – Think your debt magically disappears after you die? Think again. Any loan co-signers, joint debt holders or spouses in community property states could be held responsible for paying off your debt. This means that even if you’re not married with children, others in your life (example, your parents if they co-signed private student loans) may be on the hook.

Your business would fail without you – If you’re a business owner, it’s not only your family that depends on you, but also your employees, business partners and clients. A life insurance policy can help keep your business afloat and your employees employed should you die unexpectedly.

Your family would be unable to cover the cost of your funeral – No one likes to think about their own funeral, much less place the financial burden of one on loved ones who can’t afford it. Yet, according to the 2021 National Funeral Directors Association (NFDA) the average cost of a funeral with burial and viewing is nearly $9,000.1 A life insurance policy can help cover these costs if you believe they are too much for your loved ones to handle.

Who doesn’t need life insurance?

If none of the above situations apply to you and you’re a healthy, financially independent individual, it might not make sense to take out life insurance. Instead, it may be wiser to save and invest the money you would have spent on life insurance into a diversified portfolio that has the potential to enhance your long-term financial goals.

One thing to keep in mind, however, is that policies typically become more expensive as you age. If you believe you might experience a major life event in the near future (such as getting married or having a child), it might make sense to lock in lower rates at a younger age.

Your wealth manager can help you determine whether it makes sense to implement a life insurance policy, based on your specific lifestyle and financial situation. At Creative Planning, our wealth managers are supported by experienced insurance professionals who work as part of your team to implement custom solutions based on your needs. For more information about life insurance, or for any other financial matter, please schedule a call.


  1. https://finalexpensedirect.com/funeral-costs-and-cremation-costs/

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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