Do single people need Life Insurance if they have no dependants?

Do single people need Life Insurance? We explore the potential benefits of getting Life Insurance cover, even if you have no dependants.
Ask someone what the point of Life Insurance is, and they’ll generally give you some kind of answer relating to looking after their dependents. In other words, they intend that the pay-out from their Life Insurance policy should go towards providing for those who currently rely on them for financial support.

Usually, that means children or a spouse. In these cases, the cash sum from the policy could pay for childcare, tuition, clothing, or just the daily essentials of a child’s life. For a spouse, the Life Insurance payout could potentially cover things like a mortgage, car repayments, or any joint debt which might be transferred entirely to the surviving partner.

That might lead you to think that, for single people, Life Insurance is an unnecessary extra cost. If you have no dependents, no children, no partner and no transferrable debts, what’s the point? However, it’s not always that easy.

Does a single person need Life Insurance? Well… maybe. With Life Insurance, just like with life, the right answer for you could depend on a lot of different factors. It might be that Life Insurance just isn’t something you need right now, but consider the following…

Your circumstances could change

If you’re asking yourself, ‘is Life Insurance necessary for a single person?’ and the person in question has absolutely nobody depending on them, then you might want to look to the future. Few single people wish to remain so forever, and although this generation is leaving marriage and kids until later and later in life, it’s still something many aspire to.

Life Insurance is assessed based on your state of health, as well as a number of other lifestyle factors. A dangerous job, for example, could obviously be seen by insurers as something which raises the risk of insuring you.

For a younger, single person working an entry-level job, this risk is likely to be much lower. Setting up Life Insurance when you’re still young could mean lower premiums. This might have varying degrees of benefit, depending on the type of cover you want.

Term Life Insurance, which is set for a pre-agreed period of time, could insure you at a low cost for, say, 20 or 30 years because Life Insurance costs are generally lower the younger you are. That’s long enough to find a partner, move in together, get married, have children and financially protect them until they grow up. Opting for Whole Life Insurance (which lasts until you die and doesn’t need to be renewed) could financially protect them at this lower premium cost for the remainder of your natural life.

It’s also worth thinking about just who could be a dependent. Even if you don’t get married or have children, as time goes on, you may end up caring for your parents. If they were to outlive you, the loss of your income might have a drastic impact on the quality of their care.

What happens after you die?

Here in the UK, we’re lucky when it comes to what happens to debt after a person dies. Unlike countries like Germany, where excess debt is passed to the deceased’s next of kin, if a British person dies with unpaid debts, only their estate is used to cover that amount. Any debt which the estate is unable to pay for is then dropped.

That all sounds good, but the cost of dying could potentially be far greater than just settling your debts. According to the Money Advice Service [1], the average funeral in the UK costs £3,675, and this figure could rise dramatically depending on the kind of send-off you’d like, and the Funeral Director’s costs. A coffin, for example, could cost anywhere up to £10,000.

With the cost of death rising [2] year-on-year in the UK, is it feasible for you to expect your loved ones to cover the bill? If you suspect they might struggle, investing now in Life Insurance could protect them from having to find that lump sum. We’ve published in-depth guides to the funeral process and funeral costs to give you more details of what to expect.

What else could you add to Life Insurance?

Life Insurance doesn’t have to be a stand-alone product, one which only serves one clearly defined purpose. Many insurers offer additional extras to a policy, like Critical Illness, designed to help you meet the costs of dealing with a life-changing condition, should you develop one.

For single people, especially when you’re younger, it’s easy to think that a lifestyle of self-reliance and independence could last forever. The unfortunate reality, however, is that your circumstances might potentially change quite fast, and developing a recognised critical condition could have a big impact on your lifestyle.

By taking out Life Insurance with Critical Illness cover, you are securing cover that provides a lump sum if you’re diagnosed with a qualifying condition.

This might be used to cover medical expenses, giving you the option of paying for private care rather than sticking with the NHS. It could also be used to make adaptations to your vehicle, workplace or home to make sure your quality of life is maintained as much as possible.

Some cover is better than no cover

Remember, even if your Life Insurance needs are minimal, with no dependents to support if you die, you could still benefit from cover for all the above reasons and more. What’s more, insuring yourself for just enough to cover your own funeral costs, for example, could mean your premiums could be much lower than those of someone insuring the income of an entire household.

What’s more, the reality is that few people exist in total isolation. If you have, for example, nephews and nieces who you might want to leave an inheritance for, Life Insurance might potentially help with that.

Under UK law, if your estate is valued at over £325,000, your estate or beneficiaries will incur an inheritance tax of 40% of that estate when you die. That sounds like a high threshold, but taking property and savings into account, it’s quite possible that a single person might reach that point.

Having your Life Insurance written in trust means that the pay-out doesn’t count towards that threshold, and could potentially help your estate or beneficiaries avoid paying inheritance tax. What’s more, you could specify exactly who receives the pay-out when you die.

This could be important, especially as society moves towards embracing a greater number of non-traditional relationships and lifestyles. British law could be unforgiving when it comes to who the beneficiaries of an inheritance are, usually defaulting to the standard next of kin. Writing your Life Insurance in a Trust, coupled with a properly written Will, keeps you in control of your legacy.

Low-cost Life Insurance from Beagle Street

Even if Life Insurance isn’t for you right now, or you decide you only need a little bit, it’s a good idea to re-assess your Insurance needs from time to time, don’t make the decision and just forget about it. If your circumstances change, so might your need for Life Insurance.

If you feel Life Insurance could help protect the lifestyle and wellbeing of your loved ones, either now or at some point in the future, speak to Beagle Street. Our friendly, expert team is here to offer advice, working with you to assess your insurance needs, then find the Life Insurance that works for you.

Appendix

  1. https://www.moneyadviceservice.org.uk/en/articles/how-much-does-a-funeral-cost – Money Advice Service – How much does a funeral cost?
  2. http://www.telegraph.co.uk/money/consumer-affairs/cost-of-dying-can-you-really-save-4000-with-a-back-garden-burial – The Telegraph – Cost of dying: can you really save £4,000 with a back-garden burial? – 21st June 2016

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