Should Young People Have Life Insurance?

25 March 2020

Life insurance probably isn’t something you generally think about as a young, healthy person. Life insurance is to help your family after your death, whether to cover funeral costs or to help recover from the loss of your income. Usually, only older people think about doing this, but should young people consider it too, even if they keep fit?

What are the benefits?

Life insurance has a few benefits. It can replace your lost income for loved ones that you leave behind to help them to cover your expenses.

In your 20s, you’re likely to be unmarried and child-free, so you might not think about getting life insurance to help. However, you may decide to have children or get married later on, and life insurance might suddenly make more sense. If you wait to buy, you might find premiums are higher. Life insurance for young adults is generally much cheaper, so get it in place early to save money.

Life insurance can also be used to pay off any debts that you leave behind. This could be a private student loan, credit cards or other forms of debt, that young people often have. If your parents have co-signed your debt, your life insurance policy could allow your parents to pay it off without hurting their own finances.

Life insurance can also remove the stress of paying for funeral costs and other final expenses. By having final expense insurance, even a small policy can help if you don’t want your family to be hit by burial costs.

What kind of life insurance do you need?

For young people, options generally would include term life and permanent life insurance. To help you decide which option is best for you, seek the advice of a life insurance broker.

Term life insurance covers you for a set term, which could anywhere between five and thirty years. The policy would pay out if you died before the term expires. Permanent life insurance is meant to cover you for as long as you pay the premiums. This can allow you to build cash value in order to borrow against it.

The main thing to consider when deciding which is for you is the cost. Term life policies tend to have lower premiums, so could be much more affordable for young people to manage. If you’re still new in your career this lower premium could be more feasible. If you buy life insurance when you’re young, you will be able to accumulate a decent amount of cash value, which will have longer to earn interest.

Tips for buying life insurance

If you’re buying life insurance, take the time to do your homework, so you’re sure you’re taking out the right kind of policy for you. Think about how much coverage will you need and what you can afford.

Look into buying options. Does your employer offer any kind of insurance as part of your benefits package? What can you buy through an insurance agent?

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