Do I Need Life Insurance?

Sep 26 / Jay Zigmont, PhD, MBA, CFP®

It's perhaps one of the most basic personal finance questions out there: Do you need life insurance? If you're Childfree, the answer may surprise you. Let's take a look at how life insurance works and see why it's generally unnecessary for Childfree people.

What is life insurance for?

At its most basic function, life insurance is sold on behalf of those who rely on your income. And it is sold at a profit, so this isn't an altruistic venture. So the first step to deciding if you actually need a life insurance policy is to decide whether anyone else would be impacted by the loss of the income you provide. If you're married or otherwise partnered and share finances, would the other person be able to get by without that money?

If you have a lot of debt, such as a large mortgage on a home, the people you leave behind would benefit from getting a life insurance payout so they can pay off the mortgage, but you could also take the money you'd spend on that policy and invest it instead. And note that life insurance is NOT an investment.

Different Types of Life Insurance

If you've ever heard someone refer to life insurance as an investment, they were talking about a whole life insurance policy, which gains a cash value as you pay the premiums. Whole life insurance is extremely expensive, and there are much better investments out there.

If you feel you do need a life insurance policy, it's a better use of your money to opt for a term life policy instead. These don't build a cash value, and if you don't pass away during the covered term (often 10 years, 20 years, or beyond), you won't get any of your money back. But if you're in the process of paying off a mortgage with your spouse and know they wouldn't be able to afford the payments without you, this could be a good choice. And the easiest point of entry for a term life policy is likely a low-cost one through an employer's group life insurance program.

Childfree People Don't Usually Need Life Insurance

Ultimately, though, you likely don't need life insurance as a Childfree person. You don't have dependents in the form of children, and if you're single or otherwise managing your finances on your own, it doesn't matter whether your death benefits someone financially. Paying for a life insurance policy is like paying a monthly bill for no reason. If you do have questions about life insurance and whether you're in a special circumstance where it's worth paying for, ask your CERTIFIED FINANCIAL PLANNER™ for their guidance. And note that what you do need as a Childfree person is disability insurance, however – we'll cover that in a different post.
Jay Zigmont, PhD, MBA, CFP® is the Founder of Childfree Wealth, a life and financial planning firm dedicated to helping Childfree and Permanently Childless people. Dr. Jay is a CERTIFIED FINANCIAL PLANNER™, Childfree Wealth Specialist, and author of the book “Portraits of Childfree Wealth.” Dr. Jay is the co-host of Childfree Wealth Podcast. His Ph.D. is in Adult Learning from the University of Connecticut.

He has been featured in Fortune, Forbes, MarketWatch, Wall Street Journal, New York Times, Business Insider, CNBC, and many other publications.