5 Reasons Why Millennials Should Buy Life Insurance Now
It’s no surprise that studies show young adults are not into life insurance. There are too many other financial challenges to worry about, such as paying off crushing student loan debt and saving for future goals. Other studies show that younger adults would rather spend their money on experiences such as travel, food and beverages, or premium TV streaming services1 than use it to buy life insurance. Many are quick to spend $120 a year to insure an $800 cell phone, but fewer would consider spending a few dollars more each year to insure other property or even their lives.2
Why should you concern yourself with life insurance? You're still young and relatively healthy. What do you have to protect? The fact is the decision not to buy life insurance when you are young and healthy can be a very expensive mistake. Here are five reasons why:
It Will Never Be Cheaper
The amount of premiums you pay for life insurance is based on your age and your health. The younger and healthier you are, the less risk you pose to life insurers, so your premiums are lower. With permanent insurance or level term policies you can lock in a low premium for most (or all) of your adult life. If you wait until your forties or fifties to buy life insurance, your premiums will jump dramatically. Worse yet, wait until you develop a health condition and it can be prohibitively expensive. If you plan on starting a family or buying a home, you will need life insurance. Now is the time to buy it, when it is cheapest.
There Is Debt After Death
If you’re loaded down with debt, whether it’s a student loan, credit cards, or an auto loan, it doesn’t just go away in the event something should happen to you. For instance, if your parents took out a PLUS loan or cosigned a private student loan, they will be stuck with the balance. Although any exempt assets, such as a 401(k) plan or IRA cannot be touched by creditors, they can come after any other assets you might want to pass along. In many cases, creditors can and will go after family members to try to collect on a deceased’s debts.3 Having proper life insurance in place will provide your beneficiaries with a tax-free inheritance, allowing them to pay off any debts you may leave behind without hurting their own lifestyle.
The bottom line is you should take responsibility for your own debt to relieve your loved ones of any hassles, and having adequate life insurance protection is one of the best ways to do this.
Dying Is Not Cheap
Everything else aside, funerals do cost money. Even if your wish is to skip the funeral and have your family and friends celebrate your life, it costs money to throw a party. There can be other final expenses4 that have to be covered as well. At the very least, you should have $15,000 to $20,000 in final expense life insurance coverage.
Your Company’s Life Insurance Benefit may be Fleeting
If you aren’t considering buying any life insurance because you have coverage at work, it is most likely going to be temporary coverage. If you are moving up the career ladder or are on the lookout for better opportunities, you will be changing jobs and companies at some point. Your next employer may not offer a life insurance benefit at all - or may offer less coverage. Going back to reason number one, if you wait to buy your own individual policy it will be more expensive when you are older - that is, if you are even still able to qualify for a policy based on your future health.
Your Company’s Life Insurance Benefit is Expensive
If you are fortunate enough to be offered employer-sponsored life insurance at no cost, you should definitely take it. However, if you are required to pay for it or pay the cost of coverage over a base amount, you need to shop and compare separate coverage because it is most likely going to be less expensive. Premiums for group life insurance plans can be much more expensive after age 35.
The Bottom Line
If you are in your twenties or early thirties, it’s understandable why life insurance may be the last thing on your mind. But, when you consider the inevitable costs of postponing its purchase, it makes perfect financial sense to make it a part of your current financial plan. A whole life insurance policy may also provide other living benefits that you can enjoy during your working years, such as access to capital, liquidity, flexibility, and tax-advantaged growth even in volatile market conditions. Whether you choose a temporary level term policy to cover short-term needs like debt protection, or a permanent life insurance plan for lifetime coverage whose premiums will never change, it's a smart idea to protect yourself and your loved ones now.
Want to discuss your life insurance needs? We can help you understand the pros and cons of each type of coverage and determine what may be appropriate for you. Contact our office today for a free initial strategy session!
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Advisor Websites.