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Life insurance is confusing—here’s everything millennials need to know

Let’s set the record straight: Not everyone ne life insurance. It’s more than likely that you’ll start thinking about needing a policy as you hit major life milestones, whether that’s starting a business, getting married or having your first child.

Single:

Young and single 20-somethings probably haven’t thought much about life insurance, and that’s OK. If you’re 25 with no debt you probably don’t need a life insurance policy, Ginty says.

But if you’ve co-signed a student loan with your parents, you may want to consider getting a life insurance policy because you have a financial obligation that could impact your parents. If you suddenly died, some private lenders have clauses in their contracts that require the loan balance to be repaid immediately. Your family may need a life insurance payout to cover that debt.

Or perhaps you help support other family members — siblings, parents or grandparents. What happens to them if you aren’t capable of covering their expenses? Do they depend on your income? If so, then taking out a policy is a good bet.

The same is true if you’re a business owner and took out a loan to fund your company. Not only do some small business loans require you to have life insurance coverage, but you need to ask yourself what happens to your employees and your company if you should suddenly die? In most cases, there will be expenses that will need to be wrapped up or perhaps a portion of the loan that will need to be repaid.

Married:

Getting married often prompts couples to have hard financial conversations, and it’s not a bad idea to discuss life insurance while you’re at it. You may want to consider getting a policy if your spouse depends on your income to fund your shared expenses (or vice versa).

Financial coach Dave Ramsey recommends life insurance for married couples in situations where they, individually or jointly, racked up a lot of debt. If you live in a community property state where assets and debts are divided equally, your widow could be stuck trying to pay off all your joint debt if you died. That includes residents of Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

Plus, if you plan to have kids one day, you may want to purchase life insurance before you become a parent. Your life insurance rate is based on your age, medical history and lifestyle choices (do you smoke, for example). It’s generally easier to get a cheaper policy if you’re young and relatively healthy.

This is especially true for women. Pregnancy is sometimes considered a pre-existing condition and may complicate the process of getting life insurance. And in some cases, a pregnancy may trigger lasting health effects for women, which again, may lead to higher insurance rates.

Married + Kids:

Once you have children, you almost always need life insurance. If something should happen to you or your co-parent, a life insurance policy will help your family handle expenses. Dave Ramsey recommends once you have kids to get a policy that is worth 10 times your annual pay.