Your 20s mark a decade filled with significant life changes and personal milestones. Graduating from college, climbing the career ladder, meeting your life partner, and eventually buying a home and having kids – it’s not uncommon for all or most of these changes to occur during this monumental decade.
In the midst of all this, buying life insurance may not be on your radar. After all, you’re young, you’re healthy, you have years of living ahead of you — why would you need life insurance?
In reality, your 20s can be an ideal time to purchase a policy. Here’s a primer on times when a 20-something may want to consider life insurance coverage.
Why Life Insurance
A life insurance policy acts as a financial safety net if you were to pass away. Those daily bills we all have, which might include private student loans, a mortgage or expenses we share with a partner, do not go away when we die.
None of us has a crystal ball and can predict how long we have left to live. A life insurance policy is a backup plan to help your loved ones shoulder the financial burden that comes with death.
Life insurance can be very affordable in your twenties. For example, if you purchase a term policy (one of the most affordable types of coverage), it’ll likely cost much less per month than your daily trips to the coffee shop. A healthy 28-year-old woman can purchase a 30-year, $500,000 term policy for about $29 per month.
One of the reasons term life insurance is so affordable is right in its name. The distinguishing feature of term life insurance is that it provides financial protection for your beneficiaries for the term length – number of years – specified in the policy. If you were to die during the term of your coverage, the death benefit of your policy would go to the beneficiary you designated, and the death benefit payout is generally income tax-free.
Life insurance policies that provide permanent coverage are significantly more expensive. Permanent life insurance can cost 5 to 20 times more than term life insurance.
Who Doesn’t Need Life Insurance
Let’s first start by saying that not all 20-somethings need life insurance coverage. A policy becomes necessary when you have people who rely on you financially. Therefore, if you’re single, debt-free and financially independent, you might not need coverage.
If there are people in your life who rely on your income, then you should consider coverage. Common situations in your twenties where you should seriously consider buying life insurance include:
- You have student loan debt that would be left to a co-signer (like a parent) to pay off if you died
- You have a partner or spouse who you share financial obligations with
- You have parents or other family members who you help support financially
- You have children or plan to have them soon
Life Insurance isn’t just for Married Couples or People with Kids
One of the main reasons to get life insurance is to provide your spouse and/or children with a measure of financial security. If you have a family that relies on your income and you pass away, life insurance can help with things like paying funeral expenses, covering day-to-day bills, paying off a mortgage or putting the kids through college.
You may not have those responsibilities yet. As of 2018, the median age for a first marriage is 28 for women and 30 for men, according to the U.S. Census Bureau. But if you do, life insurance can help financially protect the people who matter the most to you if something were to happen to you.
And there are other reasons to consider life insurance in your 20s, even if a a spouse and kids aren’t in the picture.
For one thing, a life insurance policy can pay for funeral and burial expenses so your parents or other family members don’t have to shoulder that financial burden during an already stressful situation. The average funeral costs $7,000 to $10,000 and buying a small life insurance policy can relieve that burden for your loved ones.
Student loan debt is another motivator for 20-somethings to buy life insurance. The average student loan debtor owes $32,731.
If your parents co-signed on private student loans to help pay for college, those debts wouldn’t just disappear if you were to pass away. If you have a life insurance policy that names your parents as the beneficiaries, they could use the proceeds from the policy to help pay off the loans.
It may seem overwhelming to add another expense into the mix, but keep in mind that a small life insurance policy dedicated to student loan debt is usually pretty affordable. A 20-year, $100,000 term life insurance policy for a healthy 25-year-old male is only about $10 per month. Consider how long it will be before you pay off the debt when you think about the term length that might meet your needs.
You can Save Money by Buying Life Insurance in Your 20s
Like any other kind of insurance, you’ll pay a monthly or yearly bill, called a premium, for life insurance. Your age and health are two of the most important things that influence how much you’ll pay. The younger you are and the better your overall health (which can change over time as your age), the cheaper life insurance can be. If you know your loved ones could benefit from the financial protection that comes with life insurance, the time to get the most affordable coverage is now.
Early Planning Makes for Long-Term Financial Peace of Mind
Your 20s may be a whirlwind of new experiences, but they’re also a time to think about the future. Purchasing life insurance now can mean one less thing to worry about later. And with rates lower in your 20s, there’s a good chance you’ll find a policy that’s designed to fit your budget.
If you’re not sure about your life insurance needs, an online calculator can help take the guesswork out of it. A life insurance calculator will analyze your age, financial situation and dependents to recommend an amount that’s right for you, or it’ll tell you if you don’t need coverage at all.
Brittney Burgett is a writer at Haven Life.
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