Only about 52%1 of Americans have life insurance. That leaves a lot of people who either haven’t gotten around to getting coverage or decided they don’t need it.
If you're asking yourself, "do I need life insurance?", then keep reading to discover situations in which life insurance becomes a necessity.
Who will pay for my funeral and final arrangements?
Final expenses are a fact of life. And of death. Funerals, burials, cremations all cost money. In 2021, the median cost of a funeral with a viewing and burial was approximately $7,848.2Depending on your final wishes, it could come to much more, especially if you would like your resting place to be in a different state or country.
If you haven’t saved money for that purpose, your loved ones may have to foot the bill. That can be a challenge these days, when statistics show 37%3 of Americans don’t have $400 available for an emergency. Loved ones might have to take out a loan or arrange a payment plan with the funeral home, or even launch a crowdfunding campaign. If no one steps forward to pay, it’s possible the coroner’s office will bury or cremate you without a family service.
One of the main reasons people buy life insurance is to help spare already grieving loved ones the stress of coming up with money they might not have. A life policy could help cover the expenses for funerals, burials, and/or cremation.
Will out-of-town loved ones be able to afford the trip to my service?
Are you counting on having loved ones travel to your service? Many families are spread throughout the country or the world. Often people want to be there, but the cost of travel and accommodations makes it a challenge. If you have money set aside for their travel expenses, great. If not, a life insurance policy could help reimburse the people dearest to you for those costs.
Who will pay for my end-of-life care?
Often families are left with big medical bills after a loved one dies. If you haven’t left the money to cover the costs of your care, they may inherit that debt. A life insurance policy can help provide some or all the money needed to cover these expenses.
Will someone be hurt financially by my loss?
In this era of two-income families, the loss of your income could put a strain on a spouse or partner. It could cause even greater financial hardship for those financially dependent on you. In addition to children, those persons could include dependent parents. Helping to protect the financial future of loved ones is another key reason why people take out life insurance policies.
Will I have estate taxes?
If you have a large estate, and that estate is taxable, your survivors might be responsible for paying estate taxes.
Do Ineed life insurance?
Making our loved ones struggle to pay for our final arrangements and obligations is not the legacy most of us want to leave. There are people who have saved up enough money to cover all the potential needs discussed above. Many either have no children or children who are financially self-sufficient. With few or no debts, no dependents, and a healthy nest egg saved up, life insurance might not be necessary. But don’t decide to go that route until you take a close look at what your passing would mean financially to your family. If you don’t have money saved up for after you’re gone, you may want to consider a life policy big enough to cover your needs.
FAQs
Loved ones might have to take out a loan or arrange a payment plan with the funeral home, or even launch a crowdfunding campaign. If no one steps forward to pay, it's possible the coroner's office will bury or cremate you without a family service.
What happens when someone has no life insurance? ›
If you die without life insurance, any assets you left behind will be distributed to your heirs, but your loved ones won't receive an insurance payout. That may leave them to cover your funeral costs and unpaid debts on their own.
Is it OK to not have life insurance? ›
Regardless of your age, if you are at a point where you have enough income and assets to comfortably support yourself and the people who depend on you financially, you may not require life insurance. For most people with families, this only happens later in life after their children are grown and self-sufficient.
What happens when someone dies and they have no money? ›
If there's no money in their estate, the debts will usually go unpaid. For survivors of deceased loved ones, including spouses, you're not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.
What happens if you don't claim life insurance? ›
Unclaimed life insurance policy proceeds are turned over to the state in which the insured is last known to have resided (often with interest) after a certain number of years have passed, following state laws on unclaimed property.
Who pays for a funeral if there is no life insurance? ›
In cases where there is no insurance policy or other benefit available, families are responsible for covering the costs of the funeral. In addition to being a financial hardship, this means that grieving family members must make all of the funeral or memorial service arrangements on their own.
What happens if someone dies and doesn't have life insurance? ›
Loved ones might have to take out a loan or arrange a payment plan with the funeral home, or even launch a crowdfunding campaign. If no one steps forward to pay, it's possible the coroner's office will bury or cremate you without a family service.
Why do people avoid life insurance? ›
One of the most common reasons people don't buy life insurance is that they perceive it as too expensive. However, life insurance premiums can vary widely depending on the type of policy, coverage amount, and individual factors such as age, health, and lifestyle.
Is it really worth having life insurance? ›
On the other hand, if you have loved ones who depend on you financially—or you have debts that would be burdensome for your family if you died—life insurance is likely worth it. It's valuable financial protection, and is often part of a solid overall financial plan.
Is there a penalty for not having life insurance? ›
The penalty for not having coverage the entire year will be at least $900 per adult and $450 per dependent child under 18 in the household when you file your 2023 state income tax return in 2024.
Key takeaways. Most debt will be settled by your estate after you die. In many cases, the assets in your estate can be taken to pay off outstanding debt. Federal student loans are among the only types of debt to be commonly forgiven at death.
What happens to a dead body if you can't afford a funeral? ›
If you cannot afford a burial or cremation, you can sign a form with the county coroner's office and the state will bury or cremate the body for you. This will be at no cost, but you won't have any say in where or how.
Do I have to pay my deceased mother's credit card debt? ›
Credit card debt doesn't follow you to the grave. Rather, after death, it lives on and is either paid off through estate assets or becomes the responsibility of a joint account holder or cosigner.
Is it irresponsible to not have life insurance? ›
Financial Burden
In fact, the average funeral price is almost $8,000. Without life insurance to cover these costs, the burden falls on the family or the deceased's estate, potentially plunging them into a difficult financial situation that can take years to recover.
At what point do you not need life insurance? ›
At What Age Is Life Insurance No Longer Needed? Life insurance is no longer needed for many people once they reach their 60s or 70s. At this point they have retired, their kids have grown up, and they've paid off their mortgage and other debts.
How long can you go without paying life insurance? ›
What is the grace period on a life insurance policy? Your grace period — the amount of time you have to make a payment after the due date and bring your life insurance policy back to good standing — is usually 30 days, but it depends on your policy and insurance provider.
Can I live life without insurance? ›
If you don't have health insurance, you're at much greater risk of accumulating medical bills that you may not be able to pay. In a worst-case scenario, you could be sued and have your wages garnished. You might even be forced into bankruptcy.
Who gets life insurance if no beneficiary? ›
What happens to life insurance with no beneficiaries? Most life insurance companies require you to name at least one beneficiary. If beneficiaries are not named, the life insurance proceeds will go to your estate. If you don't have a will, your estate, including the death benefit, may need to go through probate court.
