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Single life insurance is a contract that protects the life of one person that is called the insured. The policy pays out a lump sum of money for the dependents if the insured person dies during the term of the contract. The policyholder and the insured person is usually the same person but not necessarily. Sometimes one person holds the contract and pays the premiums for the coverage of the life of another person. For example, a mother can purchase life insurance for her daughter and pay the premiums to the insurance company.
Single life insurance is very popular among young people that are not married. People that live alone do not have a possibility to choose between single life insurance and joint life insurance because they do not have another person to whom they could share the cover. However, it is wrong to think that these people do not need life cover at all. Although they do not need to worry about their husband or wife, there may be some outstanding debts and other obligations that need to be protected. If the person leaves a lot of loans and debts behind him after his death and has only a few assets, his loans can be written off by the creditors and considered as noncollectable. However, in such case the assets will be arrested and given to creditors. As a result, the house or a valuable car will end up in the hands of creditors instead of the closest people.
The situation could be worse, however. For example, John took out a college loan worth £250,000. Because John did not have a job and his only income was the money received from his parents the bank required John to find a respectable third party to guarantee for the loan. As a result, the parents of John co-signed the loan contract. At that time John was young and healthy and thought that purchasing life insurance cover is an unnecessary thing to consider. If John died in a car accident, his parents should have to repay the loan from their own money because under the law the co-signer is responsible for the obligation when the person that has taken out the loan cannot pursue his obligations.
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Another important reason why single people should consider buying life insurance is the cost of the funeral care. Because of inflation and aging population these costs are rising every year and as a result funeral can become a financial burden for the closest friends and relatives. In order to avoid financial distress and receive a proper funeral a person is advised to consider buying a life insurance cover. If a person does not have financial obligations and needs life insurance only to cover funeral expenses, than a small amount of life insurance benefit can be purchased. According to “Mintel” that pursuits market research, the average cost of funeral in United Kingdom in 2012 reached £3,299 and will continue to rise. As a result, the cover for funeral expenses should be chosen higher than this amount in order to leave some place for cover to depreciate because of inflation.
The third reason that supports the purchase of single life insurance cover is the guaranteed insurability option. It is hard to plan life and as a result people that are alone nowadays can get married and create a family in the future. However, at that time the health of the person can make him uninsurable or force to pay very high premiums for the insurance provider. On the other hand, if a person decides to purchase life insurance contract when he was young, for example, in early thirties, he would be able to lock the price of the premiums for a very long period of time and at the age of 55 pay the same premiums as when he was 25.
Purchasing life insurance is very important when the person is single but has a child. A single parent is the only breadwinner in his family and as a result if something happens to him, his children will be left with no income. As a result, life insurance is crucial in order to protect the kids and provide them with safety shield in case of a disaster. In this case amount of life insurance cover should be sufficient enough in order to provide the children with enough money until their adulthood. The younger are the children the bigger amount of death benefit should be selected.
The lasts but not least reason is to use single life insurance for estate planning purposes. This is especially important when a person is a surviving spouse and wants to leave the children that are already grown up estate and other assets. For example, a mother may want to leave her children the house and stocks in the bank account. Life insurance can help to avoid big financial burden caused by having to pay the inheritance tax. Children can use the money from life insurance carrier to pay the tax and avoid the necessity to sell the house.
Life insurance written on single life basis is much more popular than joint life insurance. The reason behind this is that despite higher price of the premiums single life insurance presents a lot of advantages. First of all, death benefit is paid for the death of the person that is insured whereas joint life insurance pays out a benefit only when the first of the insured people dies. Secondly, single life insurance allows avoid such unpleasant situation like the termination of life insurance in case of divorce. Last but not least, it is a good alternative for people that live alone and are single.