For the record, I am passionate about life insurance. I’ve been told that I think everybody should have life insurance. As an aside, the world would probably be better if everyone did have life insurance, but for now, I’ll focus on those who might not need life insurance.
Before I do that, it might be helpful to look at some of the many uses of life insurance. The primary uses are to replace an income and to liquidate a debt, but there are oh so many more. Final expenses (burial/cremation costs), provide liquidity, equalize an estate, as an employee perquisite, buy out a business partner, charitable bequests, pay estate taxes, and leave an inheritance.
And these are just the uses when the insured dies. While the insured is alive, the policy has many additional uses, and there is a slew of riders available that provide even more benefits. Given all of these potential uses and benefits, it’s easy to see why life insurance has been called the Swiss Army knife of financial products.
Returning to the original question of who might not need life insurance, I think the distinction should be made between “needing” it and “should have” it. I say that because I have been providing life insurance to the offspring of my long time clients. When the kids graduate college, they may not “need” life insurance if they’re not married and don’t have substantial debt, but they probably will need it eventually.
As you know, the premium for life insurance is directly correlated with age, that is, the older you are, the higher the premium. If they anticipate needing it in the future, it makes economic sense to lock in the premium when it is at its absolute lowest. So in this instance, although the person doesn’t “need” it, the case can be made that they should have it.
What about the case where the person absolutely doesn’t need it and probably never will. I believe those instances are rare, but they do exist. For example, I have a client (the gender is irrelevant) in their late 40s, never married and no plans to ever marry or have children. His/her father is a successful businessman and has created trusts for all his kids. In this situation, the case can be made that this person absolutely does not “need” life insurance.
But in reviewing the list of possible uses of life insurance in paragraph two, what if this person is deeply involved with a charity (or their alma mater) and would like to leave them a significant bequest? In that case, life insurance could be an efficient way to accomplish that desire.
In summary, yes, there are those very few instances when life insurance is not, and probably never will be, necessary. That said, the future is tough to predict, and the only downside to having it is the premium might – might produce a greater after-tax return if invested.
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