If you’re in your twenties – especially if you’re single and have no children or dependents, you may believe that life insurance is not something you need right away. Even though life insurance is a critical component of financial planning for most people, young people often tend to neglect this purchase and figure that they will purchase it later when there are clear needs for income replacement. For example, many individual start to consider life insurance when they get married or at the birth of their first child. Getting life insurance at a young age is a great way to protect yourself and your beneficiaries while locking in the lowest life insurance rates available.
So why should you get life insurance at a young age as opposed to getting it later on in life?
Paying a lower premium
Some people believe that life insurance is simply too expensive to be purchased in their younger years. This is actually the complete opposite of the truth. If you buy life insurance when you’re young and healthy, you’ll typically enjoy lower premiums than when you buy life insurance at a more advanced age. Some companies might charge a man in his forties almost twice as much as a similarly healthy man in his twenties.
The better the health, the better the cover.
If you contract a chronic health condition when you’re older (before you sign up), your monthly premiums will be significantly higher, and you’ll end up paying much more for life insurance than if you had locked into a lower rate when you were younger and healthier.
Many people in their twenties support others, including aging parents. If you have loved ones who financially rely on you, then it’s extremely important for you to provide a financial safety net for them.
Still don’t see why it’s so important to have it now? Let’s have a look at some scenarios:
Situation 1: Spouse Depends On Your Income
If you are in your 20s or 30s and have a spouse who is supported by your income, life insurance is in important purchase. Especially if you have just purchased a new home, life insurance can be the cornerstone of protecting that mortgage bond. Imagine if something happened to you and your spouse was no longer able to keep the mortgage payments. Although you may have established that this was your dream home for you and your spouse and any dependents, this home could be lost if your spouse was unable to make the mortgage payments after you passed away.
Situation 2: Your Parents Are Partially Or Fully Supported By Your Income
If you provide financial support to your parents, siblings, or other family members, the loss of that financial support could have devastating consequences for them. If you are the primary person contributing to their financial support, you need to purchase life insurance just like you would for your own family. Consider their needs and your monthly or annual contribution towards their lifestyle in the calculation of how much insurance you need to acquire.
Situation 3: You’re In Good Health
Sure, you’re thinking “I’m young, I’m in good health- why on earth would I need life insurance?”. If you can afford to buy a life insurance policy, this is the best scenario for purchasing. The reason is because your young and healthy status signals to the life insurance company that you are unlikely to pass away. For this reason, your premiums will be very affordable. If you were to develop a health condition over time, you’d also know that you are protected by purchasing a policy before you developed that issue.
Adapted from: “Why young people need insurance” – Mack Dudayev; eHealth.