Single person life insurance
There are a number of of reasons you may want to take out life insurance even if you are single and do not have any children – particularly if you have a mortgage or any outstanding credit card debts. By taking out cover, you will help your family pay off all of your debts if something does happen to you.
Covering your mortgage
The most common reason to take out life cover is to cover any remaining mortgage debts. Most policies are set up to pay out a lump sum that will be enough to pay off the home loan if the policyholder dies. Policyholders who are married or have children may extend this cover so that it also compensates for the loss of their income in the event of their death – but for single people this is usually unnecessary.
If you die before your mortgage is paid off, however, your mortgage provider can try to repay the loan from your estate (your 'collected assets'). This could involve the sale of the property in order to pay off the loan, and if the home is in negative equity (worth less than the outstanding loan balance) the lender can seek to acquire the difference from the estate.
This may require the property to be sold to pay off the mortgage. But if the home is in negative equity — where the property is worth less than the outstanding loan balance — the lender has the right to demand that the difference is made up from the estate. Life insurance cover – for an amount that is equivalent to the outstanding mortgage – will prevent this from happening.
Covering other debts
If you have debts such as credit cards or unsecured loans (excluding student loans, which are currently cancelled if the borrower dies) these also have to be paid off out of your estate if you die – so these may be another reason to take out a life insurance policy.
Even if you're single now, you may not be in the future. If you sign up for life insurance now, while you're younger, the premiums are likely to be cheaper than if you sign up later in life – simply because the risk of you dying increases as you age.
If you think there's a chance you will want to take out life insurance in the not-too-distant future, perhaps if you plan to get married, have children, or buy your first home within the next few years – it may pay to sign-up for a policy sooner rather than later.