Financial advisors hear it all the time, “I’m young, I don’t need life insurance.”
When you’re in yours 20s, money can sometimes be hard to come by and it’s tough to know how to make the most effective use of the little that you have. While most young people just starting off in their careers, things like saving up for a down payment on a house or car might be higher on their priority list. Life insurance is probably at the bottom of their list, if it’s even on the list at all.
Nobody likes to think about death, especially death at a young age. That being said, there are some great reasons that you should talk to an advisor today about life insurance, even if you think you’re too young.
1. Younger = Cheaper
Age is one of the biggest things that factor into the pricing of life insurance. The younger you are, the cheaper it is. You may not think you need life insurance in your 20s, but you can probably agree that you will need it at some point in your life. You can snag a great deal on permanent life insurance and lock in your youthful discount for the rest of your life. Imagine 40 years from now, when all your friends are trying to get life insurance and being quoted several hundred dollars per month. You can just smile and show them your bill: just a fraction of what they pay, all because you were smart and locked in your price early.
2. Cash Value You Can Use
An interesting feature of many permanent life insurance products is cash value. After you pay into your policy for long enough, it start to build up a cash value that is yours to keep if you want it. From time to time, you’ll get a statement from your insurance company that tells you how much cash value your policy has accumulated. If you wanted, you could cash out your policy (cancelling it) and take the money and run. A different option is to take a loan against your policy. Instead of going to the bank and taking a loan from “the man”, you can take a loan from yourself. This allows you to keep your policy in effect while still enjoying the cash value it has built.
To take this illustration one step further, there are some permanent life insurance products that offer dividends. In the same way that purchasing stocks in certain companies will pay you regular dividends, these premium breeds of life insurance will actually pay you real money that you can withdraw and use however you see fit. Imagine making a profit from insurance!
3. You Can Have The Right To Get More Later
There are a number of health problems that can disqualify you from receiving life insurance. Most young people are relatively healthy and will qualify currently for life insurance. Unfortunately, that good health does not always last. Today, most life insurance policies offer the option to purchase a “guaranteed insurability benefit” (GIB) for a small fee. This means that once your policy is approved, you’ll have the right to purchase additional amounts of insurance later in life regardless of your health condition. The benefit to grabbing your life insurance at a young age (even if you don’t need it) is that you might not be able to get it later in life due to health reasons. By paying a little fee for the GIB, you’ll also give yourself the flexibly to beef up your plan should the need arise.
4. The Worst Things Can Happen At Any Age
The most obvious reason for somebody in their 20s to think about life insurance is that, unfortunately, people can pass away at any age. If tragedy happens to strike, there are financial costs associated with that. Funeral and burial costs can be anywhere from $10,000 to $20,000 and beyond. If you have any substantial amount of debt (like student loans, credit cards, or a mortgage), that also has to be taken care of. The lenders aren’t going to forgive your debt just because you die; someone else just has to pay the bill for you.
See an Advisor
Every person is unique and there’s no blog post in the world that can definitively help you determine whether or not you need life insurance. Book an appointment to see a professional financial advisor and they will help you figure out the solution that is best for your unique situation.