How Young Is Too Young For Life Insurance?
Life insurance sounds like something an older, wealthier person would need, but that’s not the truth. Even if you’re young and maybe not as wealthy, you still need some type of life insurance. The trick is in knowing which is the right insurance policy for you.
What Is Life Insurance?
Life insurance is a protection against financial loss that would result from the premature death of an insured. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.
Life insurance is meant to protect the ones you love if something were to happen to you, especially if they depend on your income. The basic principle of insurance is uncertainty. Although, at a young age, it might seem like you’re spending money on something you’re never going to use, the fact is that you can’t tell what the future holds, and because of that uncertainty, insurance is a must.
Yet only 36% of 18-to-29-year-olds have life insurance, according to a study done by Princeton Survey Research Associates International. When asked why they don’t have it, most millennials said it was too expensive. Wrong again. As a healthy young adult, if you put just $20 a month into a term life insurance policy, your family could receive a $500,000 payout if you were to die.
The Type of Life Insurance For You
There are two types of life insurance to consider:
- Covers you for a period of time that can go from five years all the way up to 30 years.
- Designed specifically for financial protection.
- The need for this type of insurance decreases with age.
- In effect for your entire life while you continue to pay premiums
- Pricier than Term
- Accumulates cash value (can be used as investment vehicles)
The Right Amount of Life Insurance
The amount of life insurance you should have depends on your current status (single, married, married with children) as well as your debts, living expenses, and other factors.
Single. No Children.
If your parents are the sole beneficiaries of your policy, you can consider getting insurance just for your outstanding debts and funeral expenses.
This is a bit more complex. Take into account outstanding debts and funeral expenses, but also current budget and living expenses.
Married With Kids
In this scenario, you need to factor in all additional child-related costs (childcare, school tuition, etc.) up until the time they no longer need additional support.
Being young is not a reason to postpone getting life insurance. If you have debts or are married, you 100% need life insurance. Your circumstances will determine the type of life insurance that best suits you. Talk to an agent and get all the information you need to make the right decision.