Life insurance vital for many but optional for children, singles, seniors
By Michelle Singletary
Life insurance should be an important part of many people's financial plan. But don't be scared into buying insurance you don't need.
I wrote a column about who needs life insurance. I said you don't need to get insurance for a child, if you're single and you don't have anybody depending on you for support, or if you're nearing retirement or retired and have adequate savings and retirement investments to take care of a surviving spouse.
But letters of disagreement flooded my e-mail inbox:
Yes, it's true that the average funeral costs about $6,500, not including the burial plot, according to the National Funeral Directors Association. Adding in burial expenses, a funeral can cost about $10,000.
So if you don't have any savings, then it may be prudent to get a small life insurance policy on your child. But government statistics show the likelihood that your child will die prematurely or develop an illness that will prevent him or her from getting life insurance as an adult is low.
In fact, the American Council of Life Insurers reports that an average of one child per 3,000 dies each year, based on the 2001 CSO Mortality Table (the mortality table most recently adopted by the National Association of Insurance Commissioners). In 2003, about 83 percent of children were reported by their parents to be in very good or excellent health, according to the latest figures from ChildStats.gov.
As with most things in life, there are exceptions. So if your family has a history of medical problems, or if your child isn't being raised in a healthy environment, then it might be wise to buy a policy while he or she is young and insurable.
If you're single and you think you're going to die leaving your family without the means to bury you, then maybe you should get a small term life insurance policy for expenses.
As for seniors, if you have someone who needs your income to survive after your death, get insurance. But if you're retired with a limited income, don't buy a policy if you could use that money for something else.
As for the argument that people need insurance so their heirs can pay estate taxes, less than one out of every 100 people who die owe any estate tax, according to the Center on Budget and Policy Priorities. The first $1.5 million of the value of any estate is exempt from taxation. In 2009, that exemption is slated to rise to $3.5 million. At that level, only 3 of every 1,000 people who die will have an estate large enough to owe any tax.
Insurance is a game of chance. With life insurance, companies take a chance that whoever is covered won't die prematurely. Many people wisely purchase insurance in case that bet is wrong. However, you win at this game if you buy only what you need based on a realistic examination of the facts, not on emotion.
