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When Do You Need To Buy Life Insurance?

Simply put; you need life insurance if someone else is depending on your income. Usually this means your children, but it could also be used to pay off debt for your spouse or parents.

When Do You Need To Buy Life Insurance-Today, across the Web, hundreds of bloggers are talking about the importance of life insurance.

By taking part of this “movement”, we can help raise awareness about this often overlooked piece of financial planning in a way that transcends the audience of any one blog or website.

And here’s the thing: life insurance isn’t usually on 20-somethings’ list of financial priorities.

And that’s okay. Maybe. 

If you’re happily single and childless, you can probably skip this post (for now). But if marriage or a family is on the horizon, read on.

Although age may play a role in how much life insurance you need, the decision to buy life insurance has nothing to do with age. So when do you need life insurance? Here’s the simple rule:

You need to buy life insurance when somebody else depends on your income.

Here are some common examples:

  • If you’re 25 with a wife who is staying home with a newborn, you DO need life insurance.
  • If you’re 29 and single, you DO NOT need life insurance.
  • If you’re 27, married, and both you and your spouse work, you might not need life insurance yet, but you may want to start thinking about it anyway.

Starting a family means buying life insurance!

In most cases, you need life insurance when you start a family. Because life insurance isn’t for you – it’s to provide for your family in the event you die and can no longer take care of them.

In addition, there may be special situations in which you don’t have a family of your own but may still want some life insurance protection. For example, if a parent has cosigned with you on large student loans or a mortgage, a modest life insurance policy could pay their share in the event something happens to you. *See footnote.

Most of us begin to think about life insurance when we have children. This is what my wife and I did. Shortly after our daughter was born, we both took out term life policies in amounts that would replace each of our individual income for 20 years and cover the expected cost of our daughter’s college tuition. Expecting a second child in December, we may look at increasing our total amount of life insurance sometime soon.

If you’re wise, you might start planning for your life insurance needs before your first child is born. For example, if you’re married, you and your spouse may want to take out life insurance for each other, even if you both work. Many couples rely on two incomes to pay monthly expenses, and if one spouse were to die, the other would have to cover those same expenses by him or herself.

Another advantage to buying life insurance sooner is that insurance gets more expensive as you age. And, if you develop a medical condition, you may not be able to get life insurance at all. So if you think you might need life insurance in the future, the best time to get it may be now while you’re young and healthy.

How to buy life insurance

When you decide you need to think about life insurance, determine how much life insurance you need:

  • Multiply your annual income by the number of years you want the insurance to cover.
  • Add any fixed expenses (like kids’ college tuition).
  • Finally, subtract any non-retirement savings or investments you have that could cover some of these costs in lieu of an insurance benefit.

Next, talk to your local insurance agent or get free life insurance quotes online.

You should also take time to learn more about the differences between term life insurance and whole life insurance, which is sometimes sold as a combined insurance and investment product. Lauren and I stuck with simple term life insurance, and recommend you do, too.


*In this case, you wouldn’t need a ton of insurance, only enough to cover the outstanding balance on the loan. Although finance companies sell policies that will payoff a loan if you die, these policies don’t offer as much value as a traditional term life policy. For one, the benefit is limited to the balance of the loan at the time of death, not a fixed dollar amount. Also, it’s important to note that you do NOT need this kind of policy unless you have a cosigner who would still be legally responsible for the debt after your death.

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Published or updated on August 22, 2012

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 30.

  1. Adam says:

    My wife and I recently purchased a home and are looking to start a family soon so we felt it was a good idea to buy life insurance. I also have a good amount of student loans which made sense for us in getting a large enough term policy to cover all of those needs. My employer also provides a free of charge life insurance policy which is two times my salary. My wife has the same situation as we both work for the same organization. My question is, should this life insurance value through work be taken into consideration for the total amount insurance needed, or should it be considered as bonus money in the event something were to happen?

    • Ferdinand says:

      In my opinion as an insurance agent, I would definitely take into consideration the life insurance at work when conducting a needs analysis on a client. If for example after the fact finding, we mutually agree that the family needs a $500,000 protection, and the client has a $100,000 life insurance policy provided by the employer, I would recommend a $400,000 policy to address that gap. Unless, the client specifically states that they want a $500,000 policy AFTER understanding and agreeing on how we came up with the results of the coverage needed, only then would I submit an application for the $500,000. I believe that is the ethical way of doing business. Just my humble opinion.

  2. Jason says:

    Nice post, though I think you missed a large life insurance need beyond that of having children. How about a working couple that just bought a house? Even if children aren’t yet in the picture it may be nice for the surviving spouse to be able to stay in the home versus going back to the single-income apartment dwelling days.

    Two interesting followups could be:
    1) Term vs. Whole life – It’s my understanding that whole is better from a financial planning standpoint (as you actually have some reasonable likelihood to collect), but most people can’t afford the annual contributions on top of a diversified savings plan

    2) Whether it makes sense to buy life insurance at a young age before you need it in order to lock in low premiums.

  3. I think that even when both married people work, if there is a child involved life insurance is a must. Even a low-income spouse would create expenses in the event of his or her death. It is also nice to have a cushion for bereavement time. One of our friends had to go directly back to work just three days after the death of her husband because they had no life insurance and she couldn’t afford to take time off.

  4. jeff Rose says:

    Thanks for taking part in #LifeAWARE!

  5. Elizabeth says:

    Sorry, just saw your other post on whole life.

  6. Elizabeth says:

    Thanks for this post. It’s very timely as my mom was just giving me a sales pitch on insurance. She was (as mom’s can be) very convincing on the need to get a whole life policy but everything else I read indicates that it’s not a good investment choice. Can you weigh in on pro’s and con’s?

  7. 25 and single with no kids. Skipping this post.

    But a great read overall. Definitely something to be aware of.

  8. tom says:

    I’m in the 3rd category, new baby, both of us work. That “might” changes to “need” when one spouse makes significantly more than the other. I just took out a term life insurance policy on me to make sure my wife and child can make due in the event that I die. We also took out a smaller policy on my wife to make up for her lost income.

    I think life insurance is all about maintaining the current quality of life.

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