Should you get life insurance in your 20’s? Here’s how you do it

Most young adults in their 20’s tend to focus more on building their careers, achieving their goals and of course, making money. Very few think about getting life insurance and even fewer actually get life insurance.  

But I am sure you are wondering, do I really need to get life insurance in my 20’s?

The answer is yes.

In fact, it’s the perfect time to get life insurance as premiums are much lower. Unfortunately, many young adults ignore life insurance because:

  • They don’t feel they need it. 
  • They know they should get it, but they don’t want to incur the extra expense.

In this article, we’ll go through some reasons why you’d want to get life insurance while you’re in your 20s. We’ll also talk about the typical myths that prevent young people from getting life insurance.

Why should you get life insurance in your 20’s?

Here is why you need to get life insurance in your 20’s:

1. It’s cheaper

The reason you need to get life insurance when you are in your 20’s is that it will cost you less to buy it than when you are 30+. Some insurance providers may charge a person who is in his 40’s double the amount they would a person who is in his 20’s. Reason being, older people are at a greater risk of developing health issues than younger people.

If you decide that you want to buy life insurance, buy a plan that has a high deductible because the premium will be low. Plans with high deductibles have low premiums and those with low deductibles have high premiums.

A deductible is an amount you pay before your insurance policy starts to pay. So if your plan has a deductible of $2500, you need to pay this full amount before your insurance coverage can pay the rest of the costs.

Now, the advantage of buying a high deductible health plan is that your monthly premium will be low. In addition, you become eligible for a Health Savings Account (HSA), which is a tax-advantaged savings account. Funds put in HSAs are not subjected to income tax and they earn interest. So assuming you don’t touch the funds for a couple of years, you’ll ultimately end up with a good chunk of savings since they accumulate each year.

2. You’ll be able to continue providing for your loved ones

It does not come as a surprise that there are people in their 20’s who have family that depends on them financially. With a life insurance policy, you can safeguard the future of those who depend on you financially by ensuring they are not strapped for cash if you should suddenly be unable to provide.  

3. Pay outstanding student loans

If you have a hefty student loan or a loan cosigned by your parents or relatives, you don’t want to leave them with the burden of paying it off in case something happens to you. With a life insurance policy, you can pay off your student loans and spare your loved ones the hassle of having to pay it off should something happen to you.  

Why people in their 20’s and 30’s don’t get life insurance

When you are in your 20’s, you are energetic, vibrant, and physically fit. Generally, you are in good health unless you have a health condition. So it is unlikely for a person in their 20’s who is healthy to even think about getting life insurance.

Here are some myths that prevents young people from getting life insurance:

It’s too costly

You may be thinking that you cannot afford life insurance because it’s too costly and maybe you have mouths to feed and bills to pay. But what would you do if suddenly you find yourself in a crisis or in a situation that threatens the financial stability of your family? Sometimes it’s about looking at the bigger picture. You would rather part with a chunk of your income and ensure that you provide your loved ones with a financial safety net. Even if you don’t have a family, wouldn’t you want to be prepared in case of a crisis?

Now, it’s understandable that you may not want to buy a life insurance policy because you think it will be costly. But do you know that you can get a life insurance policy that costs next to nothing? There are life insurance policies with relatively low premium rates even your pocket would not feel the pinch.

Life insurance is for old people

If your reason for not buying life insurance is because you think it’s for old people, then that is really a bad reason. Anything can happen to anyone at any time. Nowadays, we are seeing more young people developing chronic diseases like diabetes, cancer and even heart disease. There is no set age when you should get life insurance. If anything, getting it when you are in your 20’s is much better than when you get when you are much older.

I’m healthy and physical fit

You may be healthy and physically fit today, but tomorrow, you could be in a hospital battling a chronic disease. Being young does not make you indestructible and it does not make you less vulnerable to diseases compared to older people. If you suffer a severe injury or become seriously ill, it will become much more difficult and expensive to get a life insurance policy if any at all.

What is the best life insurance for young adults?

The best life insurance policies for young adults are permanent life insurance and term life insurance.

Term Life

Term life insurance is an insurance policy that offers coverage for a fixed period of time at a fixed rate. The simplest term life insurance is the one that offers one year coverage, which is renewable once the period expires. The other common term life insurance is level term life insurance where the premium remains fixed for the duration of the coverage. When you purchase a level term life policy you choose a term. The most common terms are 10, 20, and 30.

The good thing with term life insurance is that the annual premium is fixed and therefore, you know that each year, you are guaranteed that rate of the premium will remain the same for the period of time that you are covered.

For example, if you buy a 30-year term level time life insurance worth $300,000 at a fixed premium rate of $30 per month, it means that your annual premium will be $360. This is the amount you will pay each year for the duration of the coverage. If the insured dies before the 30 year period has expired, the beneficiary named in the policy will be paid $300,000.

This type of life insurance is suitable for a 20-year old something who already has a family (wife and kids) or who has parents who are financially depend on him or her. It is one of the most affordable life insurance policies.

Permanent Life Insurance

Permanent life is possibly the best insurance for young adults because it offers an opportunity to amass cash value. The different types include universal life, indexed universal life and variable life. The differences between this policies depend on the cash value growth. Of course, how the cash value of the policy grows depends on what risks are involved.

Whole Life Insurance is the safest and the least risky, variable life insurance is the riskiest. The other benefit is that the cash value is not taxed, so you can make withdrawals up to the amount you have paid in premiums without being taxed.

So whatever permanent life insurance you buy, you know that you will accumulate cash value on that policy. Although it should be noted that permanent life insurance is more expensive than term life insurance.

The advantage of permanent life insurance over term life insurance is that even if the insured dies, the beneficiaries of the policy can benefit from the cash value.

Conclusion

There are plenty of other reasons why you should get a life insurance policy when you are in your 20’s. Don’t wait until you are older to make some important decisions like buying life insurance.

Frugal
 

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