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Who Needs Life Insurance?

Christy Bieber
David Chang, ChFC®, CLU®

Our Insurance Experts

Eric McWhinnie
Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

Who needs life insurance? Every consumer needs to know the answer to this question. It's important for those who need life insurance to buy this protection as soon as possible. Getting coverage in place ASAP ensures that a policy can be purchased while as young and healthy as possible in order to keep premium costs down.

Why buy life insurance?

Buying life insurance is important for those who currently have people relying on them. It is also important for those who will have people relying on them in the future. There's no one answer to the question, who needs life insurance coverage, because many people do. Here are some key reasons to buy coverage.

Loved ones relying on income

It's common for people to have spouses, children, or other loved ones relying on their income. If you have young children or have people who depend on you financially, life insurance is an absolute must.

Having life insurance can provide security and peace of mind to your loved ones in case of your early demise. For example, if you're the sole provider for your family or have a significant contribution, life insurance should be a top priority.

Suppose you pass away suddenly and unexpectedly; your family may struggle to maintain their finances. Life insurance can help cover the funeral expenses, debts, and provide an income stream that can replace yours, leaving your family in a much better position financially even after your death.

Loved ones relying on services

When answering the question, who needs life insurance, it's important to look beyond income. A person who provides valuable services to loved ones also needs life insurance even if they don't get a paycheck.

Even if you're a stay-at-home parent, your contributions to your family's well-being are invaluable, and if something happens to you, it can put a tremendous burden on them, both emotionally and financially.

A caregiver to aging parents may provide services that would cost hundreds or thousands of dollars per month to replace in the event of their death. Life insurance should be in place to ensure these services can be paid for if necessary.

Loved ones expected to rely on you in the future

Many young people do not yet have dependent spouses, children, or parents. But it can still be smart to buy life insurance if they expect to in the future. If you're young and healthy, life insurance premiums are usually lower and more affordable than when you're older or have chronic conditions.

So, it may be wise to lock in a good rate now. Plus, unforeseen events can happen, leading to greater costs later in your life. As a result, answering the question, who needs life insurance, requires looking ahead.

Those who expect to have loved ones rely on them in the coming years should think about buying coverage while they are young and healthy. This will reduce the cost of premiums set by the life insurance company. It will also maximize the chances they can get covered before developing any pre-existing medical conditions. Once someone has developed a major medical issue, coverage may be difficult to obtain or quite expensive.

It's important when buying coverage early to ensure the policy will remain in effect for as long as it is needed. But, many people in their early 20s or early 30s can get a term life policy that lasts for long enough to provide the necessary protection. And buying coverage so young maximizes the chances of getting approved by a wide variety of insurers offering low premium prices.

RELATED: Best Life Insurance For Young Adults

Funeral costs are expensive

Even those who do not have people depending on them may need life insurance. A policy may be necessary to cover funeral costs. Funerals are expensive, and loved ones could end up paying thousands if a deceased person didn't have money to cover the costs or life insurance in place to do so.

You own a business with partners

An individual who owns a business with others may need life insurance. When a business owner passes, they may want their surviving family members to receive a piece of the company. Surviving partners may not want to work directly with the surviving family members.

Business owners can take advantage of various types of life insurance, such as key-person life insurance and buy-sell agreements, which can help ensure business continuity in the absence of an owner's demise.

Life insurance could provide the funds for the surviving partners to buy out the family member's interests. That way, family members would be paid and surviving business partners could retain control over the company.

Estate planning

For those concerned about passing on their wealth or assets to their family and dependents, life insurance can be used to help fund estate planning needs. Beneficiaries can use the money from their life insurance policy to pay estate taxes and avoid selling the property or business they inherited, providing them with continuity and long-term financial security.

Does everyone need life insurance?

Who needs life insurance? Many people need the financial protection that life insurance gives. Here are a few examples of people who need coverage.

Spouses or life partners

People who have joined their life with someone else often have shared financial commitments. They should have life insurance in place so their surviving spouse or partner has the money to fulfill those commitments and maintain their quality of life.


Parents should look into life insurance for families. Most parents should have coverage in place to ensure their children are provided for. Life insurance can provide funds to support children if parents pass away before they are grown. The policy can also pay for the costs of a child's education.


Those who care for others, such as stay-at-home parents or people who care for their own aging parents, should have life insurance in place. The services they offer have a considerable value. Money may be needed to pay professional caregivers to provide those services in the event of a death.

Business owners

Business owners should consider having a life insurance policy in place as part of a business succession plan. The policy can provide funds to buy out surviving family members so the company's co-owners can retain control over the company.

People who need help covering funeral costs

Funeral costs are expensive. Anyone whose assets wouldn't cover funeral expenses should have life insurance. Otherwise, surviving family members could be forced to spend thousands for a burial.

It's especially important for older Americans to make sure money is available for funeral costs. That's because there's a higher likelihood of them passing in the coming years. Life insurance for seniors is available for older people who don't already have protections in place.

An estate or beneficiaries

Life insurance is a smart investment for anyone who has a large number of assets. While estate planning typically includes provisions for the distribution of assets upon one's death, life insurance can provide an added layer of financial security for loved ones.

This means that heirs who inherit a property or business won't have to sell it off just to pay off the taxes owed to the government. Instead, they can use the life insurance proceeds to mitigate the financial burden of the estate tax and preserve the assets they've inherited. By doing so, beneficiaries can sustain the continuity of their family's legacy, secure their long-term financial security, and maintain the value of the estate for future generations.

What type of life insurance do you need?

Most people should purchase term life insurance. Term life insurance is in effect for a set period of time. For example, a term insurance policy may be in effect for 30 years. At the end of 30 years, the policy would expire (or could potentially be renewed).

Term life is a good choice for most individuals because people often need life insurance only for a limited time. Eventually, their income or services are no longer needed.

How much life insurance do you need?

Most experts recommend buying life insurance equaling 10 to 12 times the covered person's income and add it to all debts. If someone has debts of $250,000 and a salary of $50,000 a year, using this rule of thumb means multiplying that salary by 10 to get $500,000, then adding the $250,000 in debts to get a $750,000 policy.

For a more individualized calculation, use the DIME formula. The total amount is a good starting point to determine how much life insurance you need. This involves adding up:

  • Debt: Total outstanding bills plus the cost of final expenses
  • Income: The number of years of income to replace (including the loss of labor a non-working spouse performs)
  • Mortgage: The outstanding balance of a home mortgage
  • Education: The estimated future education costs for children

Generally speaking, it is important to have enough coverage to cover any debts or mortgages after death, as well as provide for any dependents who may be left behind. This can include spouses, children, parents, and other family members who may rely on the deceased's income.


  • Top reasons to buy life insurance include:

    • Providing for loved ones who are reliant on income or services. For example, parents may buy coverage to ensure their children are supported. Children who care for aging parents may buy coverage to ensure professional caregivers could be paid if the child passes.
    • Covering funeral costs. Funerals can be expensive, and individuals should have life insurance in place to ensure family members do not get stuck with high bills.
  • Life insurance after age 60 is necessary if people are still reliant on the older individual's income. It is also necessary in situations where a person's estate would not have sufficient assets to cover funeral costs. Funerals are expensive and family members could end up forced to pay for them without a life insurance policy in place.

  • It may still be important to buy life insurance with no dependents. Individuals who don't currently have dependents may wish to buy coverage if they expect loved ones will rely on them in the future. This could include a future spouse or future children. It could also include aging parents who may someday need care.

    Life insurance should also be purchased to cover funeral costs if an individual hasn't preplanned their burial or doesn't have assets that are sufficient to cover funeral costs.