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If you are single and has no dependent, you should NOT buy insurance you don’t NEED!!!

Posted on: October 13, 2005

Once More, With Feeling: Who Needs Insurance?

By Michelle Singletary
Thursday, October 13, 2005; D02

Without
a doubt, life insurance should be an important part of many people’s
financial plan. Having said that, don’t be scared into buying insurance
you don’t need.

I wrote a column recently about who needs
life insurance. I said you don’t need to get insurance for a child. I
said if you’re single and you don’t have anybody depending on you for
support, you don’t need life insurance. I said that if you’re nearing
retirement or are retired and have adequate savings and retirement
investments to take care of a surviving spouse, you don’t need life
insurance.

Well, letters from disagreeing insurance agents and
others filled my e-mail inbox faster than a river rising during a major
storm.

Here’s a sampling:

· "I see time and again
that life insurance is not suggested for children since no one relies
on their income. I find this advice a little shocking and short-sighted
since a child’s funeral is not free."

· "A minor child may develop physical ailments in his teens or early adulthood that could render him uninsurable."

· "Young and single people die and leave debt."

·
"Older people, who need their money to live on, can use life insurance
to help their grandkids compete in this unbalanced society."

· "The value of life insurance on senior citizens and empty nesters is to cover the cost of taxation on their estates."

If
I may, let me add a reality check to such emotionally charged sales
pitches from, I hope, well-meaning folks who are trying to make a
living selling a product most people don’t want to buy.

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,
sure, if you don’t have any savings to speak of and you worry about
paying for a funeral, then it may be prudent to get a small life
insurance policy on your child. However, according to government
statistics, the likelihood that your child will die prematurely is low.
The likelihood that your child will develop an illness that will
prevent him or her from getting life insurance as an adult is also low.

In
fact, based on the 2001 CSO Mortality Table (the mortality table most
recently adopted by the National Association of Insurance
Commissioners), an average of one child per 3,000 dies each year,
reports the American Council of Life Insurers. 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. And in a 2003 survey of life insurance companies, the
ACLI found that approximately 98 percent of people who apply for
insurance are offered coverage.

As with most things in life,
there are exceptions. Children do die. They do get sick. So if your
family has a history of medical problems, if your child isn’t being
raised in a healthy environment, then it may be wise to buy a policy
while he or she is young and insurable.

Here’s the answer to an
industry line pitched to singles that just isn’t true: Your debts are
not inherited by family members. Unless someone co-signed on your loans
or signed paperwork to pay your bills if you couldn’t, a creditor
cannot legally make your parents, siblings or any other family members
pay your debts after you die. If you want to buy insurance to pay off
your debts, fine. But don’t do it because you’ve been told your debts
will be a burden to your loved ones.

If you’re single and you
think you’re going to die leaving your family without the means to bury
you, then okay, maybe you should get a small term life insurance policy
to cover funeral expenses.

As for seniors, the basic advice for
who needs life insurance applies. If you have a spouse or relative who
needs your income to survive after your death, get insurance. But if
that profile doesn’t fit you, if you’re retired with a limited income,
don’t buy an insurance policy if you could use that money for something
else. Yes, it would be nice to leave a financial legacy, but that’s
something you do when you’ve got spare cash.

What about the argument that people need insurance so that their heirs can pay estate taxes?

Less
than one out of every 100 people who die owes 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.

Have you noticed I keep using the word "need" when it comes
to purchasing insurance? That’s because insurance is a game of chance.
With life insurance, companies take a chance that you or 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.

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