Life Insurance?

[Snakpac]

I'm single and 25. Do I need life insurance?

I just saw a Today Show segment where a lady said that if you are single that you do not need life insurance. She said it was meant to cover your income if you have someone that is dependant upon it, and there are a lot better investments you can make with the money.

I asked my parents about it, and they said that they set it up for me so that they would be able to cover costs of a funeral if they would need it. I have college debt as well.

Mine is about $70 every six months I think.

Thanks!

[sweeps]

I agree - if no one relies on your income or caretaking, you don't need life insurance.

How much coverage are you getting for your $12/month?

EDIT: I'm assuming you're talking about term life and not whole life insurance. The situation is more complicated if you've been paying into a whole life policy.

[poundwise]

If the desire is to cover the cost of a funeral, should it be needed, then you wouldn't need much coverage. $50K will bury someone quite nicely. And, at 25 years of age, a $50K, 20-year, level term policy should be less than $100 per year. (Of course, the rate varies depending on your health class/smoking or non, etc.)

Addendum: Of course, a $15K policy would serve the point as well and cost considerably less.

[Snakpac]

Thanks for the fast replies!

Sweepsplayer- Yes, it is Term Life Insurance and the policy is for $100,000.

poundwise- I think I saw the average cost of a furneral is less than $10,000. So, it doesn't make much sense to have a $100,000 policy, and $50,000 would be more than enough as well.

[PrincessPerky]

It should cover debt and funeral, you don't want to lkeave mom with a car payment, or a casket one..

[Snakpac]

PrincessPerky- You are right I wouldn't want to leave her with the funeral costs. The only debt I have is the college debt. Do you know what happens to it? Would that be put on my parents as well, or is it forgiven by any chance ?

Thanks.

[sweeps]

Upon your death, your debts will be paid with whatever assets you have. Secured debt (mortgage, etc.) gets paid first, then unsecured debt (credit card, student loan, hospital bills, etc.) gets paid second. If your assets don't cover your debts, the creditor takes a loss. Your parents can't inherit the debt.

[Snakpac]

So, if I decided to keep a policy, I would only need to worry about the cost of the funeral, and a $15,000 policy would cover that just fine. Does that sound correct?

[b4freedom]

You don’t need life insurance.

If you die, it’ll most likely be an auto accident and your auto insurance should cover your funeral (find out how much they pay).

If you die, and you have NO life insurance, your debts get paid by what little assets you have. For example, the bank might want to sell your car, if it’s paid in full. But most likely, the bank will just figure that your loan is now defunct and will add it to the bad debts pile.

If you die, and you have life insurance, your debts get paid by the life insurance. So, basically, your life insurance is just a waste of money because it’s just going to go to the banker. And, when you’re dead, who cares about the banker? Nobody! (Except for the banker.) Now, if you have a ton of insurance, your parents will get what is left of it. In that case, tell your parents to pay for it because they are benefiting from it.

Now, if you had a mortgage and a family, then you want life insurance so that the mortgage gets paid off and you can leave some extra money to help your spouse raise the kids.

[Broken Arrow]

I fully agree that life insurance is still necessary to cover funeral expenses. I checked around the net briefly and, according to this article, the average funeral expenses in 2004 is around $6,500. That's no chump change to pass to your next of kin. Less is entirely possible of course, hence the purpose of that article. In other words, a tiny policy should do it.

[sweeps]

So, if I decided to keep a policy, I would only need to worry about the cost of the funeral, and a $15,000 policy would cover that just fine. Does that sound correct?

Unfortunately, no. Your student loan must be paid before your parents will get the money. (They're just not responsible for the student loan if your assets can't cover it.)

Here's what you have to do. Calculate your net worth: Add up your checking and savings accounts, the value of your car and any other assets you have, and then subtract all your debts including student loan, car loan, whatever.

Then subtract the estimated cost of the funeral from that number. Whatever you have for a shortfall is theoretically how much you need in life insurance. If you have a positive number, you do not need insurance.

[Snakpac]

Sweepsplayer- I came out with roughly -37,000. So does that mean that theoretically, I would need a 50,000 policy?

[sweeps]

Yes. The complication here is that you want your parents to inherit some cash for the funeral expenses. If your parents didn't need that money, you could get away with not having life insurance and just sticking it to your creditors.

[Snakpac]

Well, at least I can considerably reduce my current costs. I would love to stick it to the creditors though! Thanks again.

[poundwise]

Originally Posted by Snakpac

Well, at least I can considerably reduce my current costs. I would love to stick it to the creditors though! Thanks again.

Haha, I don't like creditors either, but I don't think I'd like to die just to spite them! LOL

[defcon]

Originally Posted by Sweepsplayer

Unfortunately, no. Your student loan must be paid before your parents will get the money. (They're just not responsible for the student loan if your assets can't cover it.)

this is incorrect. The life insurance benefit passes to the benificiary and creditors have no claim to it.

[defcon]

Originally Posted by poundwise

Addendum: Of course, a $15K policy would serve the point as well and cost considerably less.

for someone young and healthy a 50k and 15 k policy would be similar in price as it is the policy fee that would make a large part of the 1st 35-80 per year. Plus there are nopt many 15 k term policies so whoel life si your only choice at that face amount.

[asmom]

Originally Posted by Broken Arrow

I fully agree that life insurance is still necessary to cover funeral expenses. I checked around the net briefly and, according to this article, the average funeral expenses in 2004 is around $6,500. That's no chump change to pass to your next of kin. Less is entirely possible of course, hence the purpose of that article. In other words, a tiny policy should do it.

I agree completely. My husband's (unmarried) sister died Friday with $0 in life insurance, savings, and assets. Now her father is going to have to pass the hat to bury her. Her mom can't help because she's in a nursing home and her father was recently laid off. That's not a nice thing for grieving parents to have to worry about. You don't need a lot but something would be nice.

[Ima saver]

I agree, a small term life policy would be the best thing.

[getforfree]

What if instead of paying the insurance company you would put those extra money in some emergency fund that the creditors would not have access to.