- Life Insurance is Cheap at Your Age
Life insurance policies are based on many factors including your age, health, lifestyle, and even family medical history. If you are a non-smoker, and generally in good health, you are going to be rated as a great, low-risk individual for life insurance companies and they will reward you with their Preferred (and cheapest) rates (seriously, like $1 a day). Makes sense, right? A young, healthy person is not at high risk of dying, unlike the mortality risk say of a 50-year-old smoker with high blood pressure and elevated cholesterol. So, seize the day and cash in on those low rates now because premiums go up as you age and not to forget your risk of getting a chronic illness. Besides, you’re just shopping around by getting a few quotes from the best insurance companies and comparing prices side-by-side.
With so many online independent brokers, getting an instant life insurance quote is free and easy. You can process a quote for say a $1 million term life insurance policy that lasts for 20-years. The price could be as low as $25 a month. The death benefit would go to your chosen beneficiary (s)— parents, spouse, and a child. Once you lock down a rate, you’ll be surprised how easy it is to carve it into your budget, and what a smart move you took for yourself and your family.
- Funerals are Expensive
Millennials don’t like to think about death. As young, thriving people at the beginning of adulthood, we live full, active lives, and the thought of dying doesn’t even enter our minds. But things happen, and life can suddenly turn fragile. I know we don’t like to think about this, but did you know what an average funeral costs these days? Somewhere in the neighborhood of $10,000. Your parents, or family will foot this bill. Again, the death benefit from an insurance policy is tax-free, that can be used by your beneficiaries to pay for your debts.
- Don’t Dump Debt on Your Family
Most millennials are all too familiar with the burden of having student loans that they must pay back. It could take 20-years to pay back that debt, especially if you went to graduate school for an advanced degree. Let’s say in the unfortunate event that you do pass away early in your life, who do you think those loans will get passed down to? Your parents. They will now have the responsibility of paying off those loans in addition to other expenses, such as credit card debt, and the funeral of course. Buying a home and taking on a mortgage is another major debt. Upon your death, that will undoubtedly get passed down to your parents or a spouse, depending on your personal situation. A good formula to figure out how much life insurance you would need to cover those debts is to multiply the cost of those big-ticket items with 20 to arrive at an estimated amount.
- Policies with Built-in Savings
Most financial advisors would recommend purchasing a term policy for Millennials but it still benefits you to take a look at whole life insurance as well. Whole life insurance is a type of permanent life insurance that covers you for the rest of your life and acts almost as a savings or investment account, building up value as you pay into it. But like we said, financial experts usually don’t recommend it for the very young because it’s much more expensive than term life insurance and probably overkill you. However, these policies allow you to borrow the cash value that builds up, but it comes at a high price. What you might consider is buying a term life policy that has a conversion option in it, which will allow you to convert that policy into a permanent/cash value type down the road when you have the financial ability to pay for it.
- Building a Family
Statistically, Millennials are taking their time when it comes to marriage and children, waiting longer than previous generations to begin their families. Some are even choosing to live back home with their parents but generally speaking, this is an independent, ambitious group that is socially conscious and educated about finances. But late bloomers or not, Millennials are settling down and taking on more personal and professional responsibilities as part of their newfound adult status. That includes getting married, and having babies so providing for those growing family obligations requires financial planning. If it’s a dual-income family, where both spouses work, you should consider having life insurance coverage on each parent so that the couple has each other’s back. It provides a safety net for the surviving parent and a beautiful legacy to leave behind.
- Your Employer-Provided Insurance Might Not Be Enough
Millennials are extremely hard working and driven to succeed. So many are landing great jobs, commensurate with their education, and quickly climbing the corporate ladder. It’s great that some of their employers offer insurance benefit packages that might include a life insurance group plan. Millennials might assume that this workplace coverage is enough, but in fact, they’re wrong. Depending on your salary or benefits, it could be a $50,000 life insurance policy, which might not dent your college loan debt, or cover your family responsibilities. That’s why many employees buy their own separate policy to cover themselves. If you develop a serious illness and are unable to work or if you lose or leave that job and the workplace policy lapses, then your personal policy will provide a safety net for you. This all depends on the type of life insurance that was provided or whether the policy will cover medical costs. Better to play it safe than to risk losing your job and end up without coverage.
- Your Work Insurance Might Not Be the Best Fit for You
Let’s say your employer provides you with life insurance. Even though this is a great plus, it might cost you more to purchase additional coverage through that policy, than it would to just purchase a completely new and separate policy. The rates per individual might cost more since your employer is providing you with group life insurance. It might also lack certain features and flexibility than your own individual policies. Plus, these policies will increase in price after you turn 35. A “level term” life policy that you buy will not change its price for the entire period.
The Bottom Line is that in your twenties, managing your money can be tricky. You must be organized and wise in your economic choices. It’s our responsibility to learn through trial and error as best we can to gain an advantage and get a head start on our financial portfolio. We understand that life insurance is the last thing on your mind but expand your thinking and educate yourself. The more you know, the better equipped you will be to make an inexpensive purchase now that could make a world of difference to the life and legacy you are building.