I'm Young & Healthy — Do I Need Life Insurance?
If you’re like me, life insurance is probably not anywhere close to being on your radar. I'm under 30, I don't own a home, and I don't have kids. Not to mention I already have enough financial priorities on my plate what with trying to save for retirement, save for emergencies, pay off debt, and generally get my life together. The idea of paying an extra sum to insure my life is not exactly at the top of my to-do list. Besides, I’m still young and lucky enough to have my health — should I really be thinking about life insurance?
Turns out, I should. And you probably should, too.
A 2017 Princeton survey found that 65% of 18 to 29-year-olds don't have life insurance. But, even though millennials are not likely to purchase a life insurance policy, the best time to do so is actually under the age of 35. And there are a number of good reasons why purchasing life insurance early should be part of your financial plan. Read on for six reasons why.
Life Insurance Is Actually Pretty Affordable
Navigating different insurance types can be confusing. But, typically there are two main kinds of life insurance policies: whole life and term life. You want to make sure that you choose the policy that works best for your lifestyle.
With few exceptions, you don't need whole life insurance. It's very expensive, and most financial advisors will say it's not a smart option. Basically, it's a policy that lasts your entire life. The policy will pay your death benefits and also works like a savings account, accruing money that you can borrow from (but you will still have to pay interest on these loans).
Term life insurance provides coverage for a specific period of time, or 'term,' usually 10, 15, 20, or 30 years. Premiums (or annual payments) are fixed and coverage tends to be far less expensive than whole life insurance. You should get estimates to determine what kind of coverage you might need, but if you decide on term life insurance, in some cases you can get short-term coverage for as little as twelve bucks a month.
Being Young & Healthy Is A Good Thing
The older you are, the more it costs to get life insurance. This shouldn't be too surprising, since health generally begins to decline with age and your risk of death also increases. Generally, life insurance rates increase slowly over the course of your 20s and 30s, and once you hit your 40s there can be a spike. From there, the cost can increase pretty significantly year over year.
Whenever you do choose to buy a life insurance policy, you should choose a level term policy so the annual price you pay for insurance won't change. And if you buy a level term policy when you're young and healthy, you'll ultimately save money — sometimes, upwards of thousands of dollars.
Your Company Insurance Probably Isn’t Enough
Many professionals have life insurance coverage offered through their job. And, while this is great, it’s not always the best blanket option. For example, if you are laid off, change jobs, or your company folds, you could lose this insurance. And, since it's usually cheaper for you to buy a separate policy than to add on coverage to your employer's insurance, it might be a good idea to look into your own options to make certain your bases are covered, regardless of who you are employed by.
Funerals Are More Expensive Than You Think
It’s definitely not pleasant to think about an unexpected, early death. But accidents do happen, and if they do, your family or partner can often be left to pick up all the pieces.Today, the average funeral costs between $7,000 and $10,000 in the United States.
Depending on your family’s financial standing, this can be a potentially devastating cost. And, while some families who are faced with this kind of unexpected tragedy turn to crowdfunding or other strategies, having a life insurance can take care of everything so your family doesn’t have to.
Insurance Can Protect Your Family Or Partner
Most millennials are waiting longer to get married and have kids, but if you are one of the exceptions, you very likely want to look into life insurance.This is particularly important if your spouse is a stay-at-home-parent and is dependent on your income to survive. But, even if you aren’t married with kids, there are other ways that not having life insurance could affect your family.
Today, more than 44 million Americans have student loan debt, with the average amount hovering around $33,000. Generally, if you have federal student loans and die unexpectedly, the loan is canceled and the debt is discharged. Unfortunately, this isn’t the case with private student loans. Depending on your student loan policy, if something were to happen to you and you pass away, your debt could fall to your spouse or your parents. And this doesn’t just apply to student loans.
If you and your spouse recently bought a car, signed a new lease on a pricy apartment, or racked up a bunch of credit card debt, and something happened to you, you should consider whether they would be able to shoulder these debts on their own. Having a life insurance policy could prevent these unfortunate scenarios from playing out.
The Bottom Line
Insurance can be a confusing, emotional, and stressful topic. While it might be unpleasant to plan for, doing so can pay off in the long run. These are just some of the considerations you should begin to make when it comes to long-term financial planning, and there are many other factors to keep in mind.
If you’re at all considering taking out a life insurance plan, there are plenty of online resources for weighing out your options, and financial advisors and experts who can help you navigate this objectively convoluted terrain. Ultimately, only you know what's the right decision for your specific set of circumstances. But, whatever you do, don’t let the uncomfortable topic deter you from getting the coverage you need to protect yourself and your family.
