Single Americans who think they don’t have a care in the world still need to take care of themselves financially.
Even those without kids should consider protecting the only dependent they have—themselves.
In observance of Unmarried and Single Americans Week (September 16-22), the Insurance Information Institute offers advice on coverages that many singles might not think they need.
In the U.S., 33 million people lived alone in 2011—53 percent of unmarried residents 18 and older were women while 47 percent were men, according to the U.S. Census Bureau. Being single can affect insurance and financial needs. The I.I.I. suggests the following six ways to enjoy living the single life securely.
1. Life Insurance
According to the U.S. Census, there were 13.6 million unmarried parents living with children in 2011. As a single parent it is crucial to make sure dependents will be financially secure in the event of death, so life insurance should be a key element of a financial plan. For those without dependents, life insurance can be an excellent way to pay final expenses or leave a significant contribution to a charity. Furthermore, whole life or permanent life policies create a cash value that, if not paid out as a death benefit, can be borrowed against or withdrawn on the owner’s request, creating a kind of “forced” savings plan.
2. Disability Coverage
Singles should consider what would happen if they were disabled and unable to work as a result of an accident or illness and what they would do for income? Disability income insurance can replace lost income. Keep in mind that 43 percent of all people age 40 will have a long-term (lasting 90 days or more) disability event by age 65. While many employers offer disability coverage, some smaller businesses may not, but a private disability policy could replace 50 to 70 percent of lost income.
3. Long-term Care
The good news is we are living longer. The bad news is long-term care services can be expensive. Anyone who lives alone and does not have the financial resources to pay for home health care, a nursing home or an assisted living facility, a long-term care policy can be a solution. In general, it’s a good idea to buy this type of insurance well before age turn 60—there is less chance of being rejected, and younger age equals lower premiums.
4. Health Insurance
No matter how healthy someone is now, sickness can strike at any time. An employer-sponsored health insurance plan is the best way to go. The premiums are generally considerably lower than those for an individual health insurance plan because the plan is group rated and the employer contributes toward the cost. If an employer gives a choice of plans, understand the options and pick the most suitable plan. If an employer doesn’t offer a plan, or if someone is unemployed, self-employed or decide to return to school they may want to buy an individual health insurance policy. Keep in mind that starting in 2014, everyone will be legally required to purchase health insurance should their employer not provide it.
5. Homeowners and Renters Insurance
Singles are somewhat more likely to rent than own their home; according to the U.S. Census Bureau around 20 percent of owner-occupied homes are one person households, while close to 40 percent of rental households are occupied by a single person living alone. If renting a house or apartment, a landlord’s insurance will only cover the costs of repairing the building itself in the event of a fire or other disaster. Renters need their own coverage, known as renters insurance, in order to financially protect themselves and their belongings.
Homeowners, whether it is a house or condo or co-op apartment, should make sure to have both the right amount and the right type of insurance. Homeowners insurance covers the structure, personal belongings, liability and additional living expenses. With condo or co-op insurance, on the other hand, they’ll need to make sure there are two separate policies to protect an investment: an individual insurance policy, that provides coverage for personal possessions, liability, structural improvements to the apartment and additional living expenses; plus a “master policy” provided by the condo/co-op board. The latter covers the common areas shared with others in the building, such as the roof, basement, elevator, boiler and walkways, for both liability and physical damage.
6. Retirement Income
Single people may need to be more self-reliant when it comes to investing for their retirement as they may not have a spouse or children to step in and help out should the need that support in the future. Most single people will qualify for retirement income from Social Security, but that will likely be only enough to pay bare necessities in retirement. Some will have retirement income from a “defined benefit” type of pension plan—one that pays an income based on final income and years of service from an employer. Social Security income increases to match inflation, but defined-benefit payments do not, so they will become increasingly inadequate the longer someone lives in retirement.
For retirement income security, if an employer offers a 401(k) type retirement savings plan, it’s advisable to contribute the maximum they can to it—especially if the employer matches the contribution. (The employer match is, in effect, extra pay for no extra work). If a 401(k) plan isn’t available, individuals can start their own tax-favored retirement savings plan. At retirement, someone may consider using some of their retirement funds to buy an annuity, which pays a fixed income for the rest of someone’s life, to ensure that their lifetime income (from Social Security, a defined-benefit pension, and the annuity) is enough to pay all expected continuing expenses.
Other Things to Consider
Talk to an insurance professional about getting the best insurance protection for specific needs and check for all available discounts.
In today’s society good credit is more important than ever. A clean credit record will allow for higher credit limits, lower interest rates on credit cards and more favorable interest rates on loans. Many landlords now perform credit checks before leasing an apartment and some employers investigate credit histories before making job offers. So whether buying a home, applying for a new job or looking for the best price on insurance, a good credit history will go a long way toward realizing financial and personal goals.
