Does purchasing life insurance in your younger years seem like an afterthought? If you’re at the prime of your life, still figuring out the ropes of adulthood, perhaps you haven’t put much thought into what would happen in the aftermath of tragically dying before your time.
According to a recent survey, despite having the least amount of life insurance coverage (10%), millennials feel more financially secure than the overall population. If you’re single and dependent, you may think that you don’t need adequate life insurance coverage. However, the decisions you make today can significantly impact your future finances as well as your loved ones.
Here are several compelling reasons why you should consider purchasing a life insurance policy as a young adult.
The Advantages of Investing in Life Insurance As a Millennial
- It’s cost-effective. Life insurance premiums are based on many factors; the two main ones are overall health and age. You can lock in the best rates while you are healthy and young, since you are less of a liability for an insurance company. If you wait until your 30s or 40s to purchase a policy, you’ll see the monthly cost increase significantly.
- Ease financial burdens on your loved ones. If you were to pass unexpectedly, your unpaid debt may befall onto your parents or spouse. Having a monetary cushion like life insurance can ease the financial burdens you may leave in your wake such as car, home, and student loans and credit card debt. It can also help alleviate the stress of paying for a funeral, which can cost anywhere between $6,000 and $10,000.
- Protect your family. When you’re young, you tend to focus on your personal situation, but that all changes when starting a family. You want your family to be able to live comfortably, but what happens if your income is suddenly removed? A life insurance policy can help make sure your little ones and spouse will be supported if the worst-case scenario happens.
Term vs. Whole Life Insurance
Navigating life insurance policies can be complicated and daunting, but there are two distinct types worth considering.
Term or “pure” life insurance is the most affordable type of policy because it has no other cash value. This policy covers you for a set number of years such as 10 or 20, and you receive death benefits only if you pass away within the term. Your coverage ends when the term concludes, or until it’s converted into a more permanent life insurance policy. Term life insurance caters to the millennial generation, since it’s the best option for individuals who are gaining independence, raising a family, or building a business.
Whole life insurance is more expensive because you’re paying for an investment portion, not just the insurance. It’s a permanent policy because it offers lifelong coverage. Whole life insurance provides death benefits as well as cash value accumulation that builds during the policy’s life. You’re also allowed access to your policy’s accumulated cash while you’re living.
Whole life insurance might be better for the following scenarios:
- You want to spend your retirement savings while still leaving money for final expenses
- You want to provide money for your heirs to cover estate taxes
- You have a lifelong dependent such as a child with special needs
The Detrimental Effects of Not Owning a Life Insurance Policy
Passing away without life insurance can create all kinds of emotional and financial problems for loved ones.
Here are five inevitable consequences of not having an adequate life insurance policy:
- You can leave your dependents in a financial crisis.
- You won’t be able to save on taxes.
- You can leave your child’s future insecure.
- Your family can become trapped in debt.
- You may be financially dependent on others in your old age.
Whether you’re a college graduate with crushing student loan debt or a young parent working to finance your child’s college education, purchasing life insurance may be one of the best decisions you ever make. Consult with a professional life insurance broker to learn more about your options.
Author bio: Sean Giroux, Vice President of Operations at IMS Settlements, has cultivated his life settlement expertise over his 15 years in the industry. Giroux and IMS Settlements blend personal attention, technology, and a robust buyer platform to ensure they find the best solutions for agents and clients within their uniquely simple and transparent process. IMS Settlements has helped many financial professionals and clients throughout the country receive substantial value from existing life insurance policies.