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Think You’re Too Young for Life Insurance? 4 Reasons You May Need to Think Again
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If you are young, healthy, and have no plans to get married or start a family anytime soon, you may not need life insurance yet. But there are some exceptions.
Main points
- Having children isn’t the only reason to buy life insurance.
- You may need life insurance if someone relies on your income, or if you have business partners or certain types of debt.
- Life insurance can relatively cheapespecially for young people.
- Term life insurance is simple and affordable.
If you are not sure whether you need life insuranceanswer the following four questions. Answering “yes” to any of these may mean you should consider purchasing a policy.
1. Does anyone depend on you for income?
Even if you are young, you probably still have people who depend on you financially. An elderly parent or younger sibling may need your help.
Many people don’t need life insurance until they have children. But it makes sense if you have someone in your life who might be affected financially by your death, said Uziel Gomez, a certified financial planner at Equalis Financial in Los Angeles.
“Many first-generation wealth creators play a critical role in supporting parents, siblings or extended family,” Gomez said. “In these situations, life insurance is more than just a ‘must-have.’ For It’s a vital safety net for those who depend on you, even if you don’t have children of your own.”
2. Do you have student debt or mortgage?
Life insurance can help ensure that your family won’t be burdened with any expenses you might be left with after your death. If you co-signed a loan with a parent, partner or friend, they will be fully responsible for the remaining balance if you die before the loan is paid off. It’s a good idea to buy enough insurance so that your debt can be paid off.
3. Do you have any business partners?
For young entrepreneurs, a business partnership may end up being a closer financial connection than family. If one partner dies unexpectedly, the other partner may face significant financial challenges, such as repaying debts, paying daily expenses, or even buying out the partner’s share of the business.
If this happens, a life insurance death benefit can provide the funds to keep the business stable. It can fund “sale and purchase agreement”, which provides for the manner in which a partner’s share of the business is transferred upon his death.
4. Do you want to pay the lowest premium?
If you are young and healthy, life insurance can Relatively affordable. A healthy 25-year-old can expect to pay about $20 per month for a 20-year term life policy and receive a $500,000 death benefit. This is lower than the average monthly alcohol consumption among 25 to 34 year olds.
Waiting until later may make life insurance more expensive because of premiums rises with age or if a health problem arises. The chart below shows the price of the same $500,000 20-year policy at different ages, illustrating how life insurance rates climb with age.
| Monthly premium for a 20-year $500,000 term life policy | ||
|---|---|---|
| age | gender | price |
| 20 | male | $18 |
| female | $15 | |
| 30 | male | $19 |
| female | $16 | |
| 40 | male | $28 |
| female | $24 | |
| 50 | male | $67 |
| female | $52 | |
While adding a dollar or two over the course of your 20s may not seem like much, that’s only if you stay healthy, which is not guaranteed.
“If health problems arise later, life insurance becomes more expensive and harder to qualify for,” says Jovan Johnson, a certified financial planner and co-owner of Piece of Wealth Planning in Atlanta.
You don’t have to make hasty decisions
Like every financial decision, you should carefully consider whether to purchase life insurance. Buying the wrong product can be a costly mistake. term life insurance Usually the easiest and cheapest option. You buy it for a certain number of years (say 20 or 30 years), and after that, it’s gone. But you may hear more about other Types of life insurance Earn higher commissions for sellers.
“A lot of the policies they’re trying to sell to young people are not term life insurance,” said Sarah Behr, a registered investment advisor and founder of Simplified Financial Planning in San Francisco. “They try to sell whole, universal and variable coverage, so you’re paying $700 or so a month for a life insurance policy because someone living in your dorm happens to work at Northwestern Mutual, not because it’s a A viable way to protect your net worth.”
Some younger people may need life insurance, but it’s perfectly fine to wait until you have children or other dependents, Bell said. “Of course don’t delay,” she said. Waiting until age 55 to take action will come at a huge cost. “But don’t spend years paying for it before you need it.”
bottom line
Young, healthy people can usually wait to buy life insurance. But not always. If you have dependents, joint debts or business partners, life insurance can provide important financial protection to those around you. And it’s still relatively cost-effective to buy now.
“Buying life insurance now can provide peace of mind and financial protection for the people you care about, now and in the future,” Johnson says.
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