Do You Need Life Insurance?

Corey —  September 29, 2009

       Before you go out and buy life insurance, you need to ask yourself if you really need it. And when you’re buying it, you need to ask yourself how long you’ll need it. Not everyone needs life insurance, and not everyone needs life insurance for their whole life.

If You’re Single with No Dependents…

       If you’re not married and you have no one who depends on your income to provide for their necessities, then you do not need life insurance. If you want to cover your burial expenses, you’re better off just saving up the money yourself. Your savings can cover your burial expenses without putting that burden on anyone else. If you’re young and you haven’t saved enough to cover those expenses yet, then you might consider a 5 or 10 year term life insurance policy. That will give you enough time to save the money yourself, but it won’t cost you very much either. (Especially if you’re only talking about $10,000 or $20,000 of coverage.) And no, you don’t need to cover your debts. Whatever your estate cannot cover will be forgiven at your death. Your parents won’t get stuck with your debts.

If You Can Self-Insure…

       To self-insure means that your assets take the place of insurance. Once you reach a point where your assets can do what your life insurance was meant to do, you don’t need the life insurance any more. This is why most people don’t need life insurance for all their life. If your life insurance is meant to replace your income but you have enough retirement savings to do that, then you don’t need life insurance. This is why a 30 year term life insurance policy will be plenty for most people if they continue to save for retirement. After that length of time, their retirement savings can replace their income if they die.

       Maybe you bought life insurance to cover your mortgage if you or your spouse die but you’re not worried about replacing your income. If your savings could pay off your mortgage of if you’ve paid off your mortgage early, then you don’t need the life insurance policy any more.

Make Sure You Really Need It

       Insurance is meant to cover a risk. With life insurance you’re usually covering the risk that you’ll die but your dependents will still need your income. If your savings can cover that risk for you, then you don’t really need the insurance.

       You should use this same logic when deciding whether you should get term life insurance or permanent life insurance. If you know you’re going to save for retirement and you’ll have a good bit saved after 30 years, then you don’t need life insurance coverage to go beyond that. A 30 year term life insurance policy will cover you until you get to that point, but you don’t need to keep permanent life insurance coverage because you can self-insure.

       Don’t get insurance just because someone tells you it’s a good idea. You need to look at your own situation and ask yourself if you really need it. If you do need it, then ask yourself how much you need and how long you need to be covered. (That is, ask yourself how long until you can self-insure.) Paying for insurance you don’t really need is a complete waste of money.



Corey is currently pursuing a Master of Arts degree in religion. While he enjoys learning and writing about Christianity, another one of his new passions is writing about personal finances in order to help others make wise decisions with their money.

3 responses to Do You Need Life Insurance?

  1. Could this article pertain to your house as well? I mean could you say you don’t need insurance if you don’t own a house (i.e. renter’s insurance) and then say once you pay off the house if you have some assets you should drop your coverage and self insure. Would that work the same way?

  2. Evolution of Wealth:

    This can apply to any type of insurance. If you can self-insure and you don’t need that money for something else, then you’d just be wasting your money by having the insurance. But I’d be certain that the money I have set aside is only for the self-insurance. If your counting on your retirement assets to cover the cost of replacing your home, what would you live on after rebuilding your home? The assets you count for self-insurance should be over and above your other needs, though there are some exceptions to this rule (like when you’re looking at long-term care insurance). I could take an entire article to explore that issue though, so we’ll have to wait until I get to it.

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