Why should young adults consider buying life insurance now? Thinking realistically about death may be difficult for someone in their twenties to do. But death is unpredictable, non-discriminative, and inevitable. Buying life insurance early on gives someone the opportunity to lock in coverage today that may not necessarily be available later.
Allow us to walk you through more benefits of buying life insurance sooner than later…
Life insurance rates are largely affected by age and health conditions, including height, weight, and smoking status. Purchasing insurance at a younger age will save you money in the long run. The rates are more expensive the older you are, and a health condition is more likely to affect the rate as well. Just one trip to the hospital could drastically impact your eligibility. Past events and previous/existing conditions, such as high blood sugar, bi-polar disorder, early strokes, blood disorders, and even DUI’s can impact eligibility.
Life insurance will provide your beneficiaries with a death benefit that can help you pay medical costs, funeral expenses, loans, mortgages, debts, college tuition, monthly expenses, child care costs, and replace lost income.
There are two ways to purchase life insurance: you can rent or own the coverage. When you purchase “Term” insurance, you are renting the coverage for a for a specific period of time (10,15, 20, 30 years). Premiums are typically inexpensive. *For example, the monthly cost for a $500K life insurance policy for a healthy 25 year old male is as low as $21 and $35/mo for a 20 year and 30 year term, respectively. It’s even less costly for women. You can also convert to a permanent insurance plan without undergoing medical underwriting.
When you purchase Permanent Insurance (often referred to as “Whole Life”), you own the benefit for life. The death benefit is permanent, so it provides protection for your entire life and can actually increase over time. The premiums are considered contributions to an asset. Policies can potentially be “paid up” by the time you reach your retirement years.
This is a great way to build wealth on a tax favorable basis. In addition to the pool of money that will be paid upon your passing, there is also a Cash Value that accumulates inside the policy that you can access anytime without restriction. The cash value often grows to a point where you have more cash than what you contributed. Access to this cash can also be tax free, including gains.
*For example, for $100/mo, a healthy 25 year old male can purchase a $100K policy that would be “paid up” by age 65, when no additional premiums are required. By 65, based on current dividend rates of the top insurance carriers, the death benefit would double and the cash value would be expected to almost triple the total cumulative contributions.
*If the same person waits 10 years to start the policy (assuming health status hasn’t changed), the premiums would increase to about $150/mo, and by age 65, both the death benefit and the cash surrender value would be about 25% less than starting the policy 10 years earlier.
It pays to get life insurance while you are young, healthy, and a more desirable applicant. The younger you are, the less expensive the premium will be. Make life insurance a part of your balanced financial plan or budget.
Taking care of yourself and your family’s future today will save additional stress and worries tomorrow. Contact us today and we will be happy to discuss your situation with you in more detail.
* The examples in this post are intended to educate the reader generally about the benefits of life insurance for younger people, through the use of hypothetical “details” including coverages, cash values and premium costs. These are approximations based on the author’s experience, but are not facts that would necessarily apply to the reader’s own situation or to that of any other person. Reliable information regarding such items as coverages, cash values and premium costs may only be obtained through formal communications with your broker.