A reader in his late twenties wrote to me. He's single, no spouse and no kids. He already saves in a 401(k) and a Roth IRA. He likes the idea of an indexed universal life policy for the savings and the lower risk, and he'd use loans to pay for cars, emergencies and a house down payment. His concern was simple: with no family to protect, does he have a real reason for life insurance?
I started with the first part of his question. Insurable needs change, and cash value life insurance is built to be held for decades. You buy it while your health is good and the cost is low, and the policy is there when your life looks different. Ask yourself a few things. Do you expect a spouse or children someday? Is there a person or a charity you'd want to leave a gift to? Does a business partner depend on you? Does a parent?
That last one gets overlooked by most people. Say a parent dies. You may not depend on their income, but you might need weeks or months away from work to grieve. Some people go straight back to their jobs and some can't. If you don't know which one you are, a policy on a parent can give you the choice to take time without a financial squeeze. It's better to have that option and not use it than to need it and not have it. You can usually buy coverage on a parent, with their agreement and a medical exam.
On the product itself, I made a few assumptions. He said he's comfortable in the stock market already and wants some protection from the downside, so an IUL could make sense for part of his savings instead of sending all of it into the market. An IUL credits interest tied to an index, with a floor that keeps a down year from reducing your cash value. The credits aren't guaranteed, and the insurance charges come out of the policy every year. If he doesn't own anything that moves independently of the market, a whole life policy might make sense first.
His email and my full reply are in a viewer Q&A video on whether an IUL fits when you have no dependents, where I go through each of his questions in order.
I'm a licensed insurance broker, not an investment advisor, and I'm not telling him or you to buy anything. Start by listing the people and the plans a policy would serve. If that list is empty today, write down what would change it, such as a marriage, a child, or a business partner.