Why Young People Should—or Shouldn’t—Buy Life Insurance

Life insurance tends to be viewed as a product that young people—especially single ones who don’t have children—don’t need, but there are a number of reasons for them to buy it.

life insurance couple

It’s often stated that you need life insurance if someone depends on you financially.

It doesn’t really matter who that “someone” is—it could be a spouse, or a child, or a parent, or a sibling.

Whatever the case may be, if there’s at least one person in your life who relies on you and your income to survive, you should strongly consider purchasing some form of, and some amount of, life insurance coverage.

Which goes a long way toward explaining why it’s also often stated that young people—with Millennials and their slightly older cohorts being perfect examples—don’t really need to concern themselves with life insurance.

This is especially true when the young people in question are single, or are married but don’t have children, or otherwise don’t have anyone in their lives who would suffer financially if they were to pass away.

The thing is, although there are circumstances and situations—some of which will be touched on later on in this article—where a young person could feel completely justified in forgoing life insurance, there are just as many situations and circumstances that can be highlighted as examples of when someone who is less than, say, 35, should do a bit of research, talk to a couple of insurance agents or brokers, compare quotes from a number of companies, and buy a life insurance policy.

Here are a few cases in point:

When Young People Should Buy Life Insurance

You have one or more “dependents”

As has been suggested a number of times already, the biggest reason to buy some kind of life insurance is to make sure anyone and everyone who depends on your income for survival will be provided for financially after you’re gone.

Jeff Root, owner of Rootfin Life Insurance Agency in Austin, Texas, says the words above basically serve as his “rule of thumb for everyone.” Whether you’re single or married, or whether you’re a parent to any children or none, “if you have someone [who is] financially dependent on you … you need life insurance.”

Although it’s easy to get caught up in the idea that the aforementioned “financially dependent” folks have to be spouses or children, they’re just as likely to be live-in boyfriends or girlfriends with whom you own a house, siblings (especially those with special needs), or aging parents or grandparents.

Getting married, having children, and buying a home shouldn’t be the only triggers that push you to shop for or buy life insurance, says Nilufer Ahmed, Ph.D., senior research director at Windsor, Connecticut-based LIMRA Insurance Research.

If you’re responsible for anyone’s care, she adds, “you have to think about what will happen to that person or those people if something should happen to you?”

Something else to keep in mind here is that your parents or grandparents don’t currently have to be relying on your income for you to cover them with a life insurance policy. So, if you think either of those relatives may find themselves in some sort of long-term care setting in the near future, either because of disability or simply due to the normal effects of aging, investing in life insurance could provide you with some peace of mind that those loved ones will be taken care of should you pass away.

You can’t stop yourself from dipping into your savings account

Ask a few people who sell life insurance to list the product’s “key features” for you, and most, if not all, of them will include in their rundown that it can serve as what a lot of industry veterans like to call a “forced savings vehicle.”

In other words, unlike, say, savings accounts, mutual funds, bonds, or stocks, life insurance policies require you to regularly invest in them, which in the long run “forces” you to put a certain amount of money aside that you can make use of in various ways once you’re older. (And of course it also offers up a death benefit that can assist loved ones if something should happen to you in the ensuing years.)

Granted, this particular “benefit” isn’t likely to appeal all that much to those who are diligent about saving for their futures (and who might be better off diverting a portion of their income into some other form of investment that offers better returns), but if you’re the kind of person who can’t leave the contents of your savings account alone, you may want to give life insurance a try.

You want to pay as little as possible for life insurance

Another rule of thumb related to buying and owning life insurance is that the younger and healthier you are, the lower the payments tied to your policy are likely to be.

That’s because life insurance premiums are based on mortality, and with the average American’s life expectancy currently hovering around 80, insurers tend to view people who are young and in good health as being less risky than pretty much any other segment of the population and treat them accordingly—by offering up policies of this kind of insurance for surprisingly small sums.

Those sums only increase as you age, by the way—which is why Harley Lockhart, an independent financial advisor based in British Columbia recently told Financial Post that one of his go-to pieces of advice to clients is “the earlier you buy insurance premiums, the cheaper they’ll be and the longer you’ll be able to lock them in at that price.”

You want to protect your ability to purchase life insurance in the future

Not only is life insurance cheaper to buy when you’re young and healthy, but it’s also easier to buy when you’ve yet to put too many miles on the odometer, so to speak.

Specifically, obtaining life insurance—at a reasonable price, especially—is a much simpler task if you’re under a certain age and you haven’t had to deal with any of the medical issues that can make it a lot more difficult, if not altogether impossible, to gain access to down the road.

“Lots of things could happen to you” before you experience the life events that tend to push younger people—and older people, too, for that matter—to purchase life insurance, Ahmed says. “You could get sick or be forced to deal with some other sort of health issue that might keep you from being able to qualify for it in the future.”

Ahmed adds, by the way, that she’s come across numerous people in her work “who waited [to buy life insurance] and ended up wishing they’d bought it when they were younger and when it was cheaper. I definitely see people who regret not buying it earlier.”

So, even if no one is financially dependent on you at the moment, “consider your future health,” Root says to Gen Xers and Yers who are on the fence regarding life insurance. “When you want to purchase life insurance [in the future], you may not be able to because of various health conditions.”

You want to supplement the life insurance policy you obtained through your employer

There’s no question that if an employer offers to buy you a life insurance policy, you should take them up on it.

That said, there are a few drawbacks tied to this kind of coverage, with one of them being that “most group life insurance policies aren't portable,” Root explains. “If you leave your job, that benefit is gone.”

This is an especially relevant issue for younger people to consider, Ahmed adds, due to the fact that Millennials “are known for job-hopping.”

“What happens if your new employer doesn’t offer group life insurance? In those kinds of cases, you’re basically going to be forced to buy individual life insurance,” she says—which isn’t necessarily the worth thing in the world, of course, as the latter, unlike the former, will follow you no matter where you go or what you do.

Speaking of which, although group life and other forms of workplace life policies may prove to be enough for some young people—especially those who have few, if any, dependents—others are going to want to bolster that coverage with an individual policy that has to be purchased outside of the workplace.

For example, Root says that when it comes to dual-income couples that don’t have children, “it depends on their liabilities” as to whether or not the coverage supplied by an employer will be sufficient. For example, if the couple in question “[has] a mortgage and one person unexpectedly passes, will the [surviving] spouse be able to continue living in that house and support the same lifestyle on a single income?” If not, a policy acquired in the workplace won’t be enough.

You want to keep anyone from having to cover your funeral expenses or other debts after you’re gone

Some young people, even those who currently don’t have anyone who depends on their income for survival, decide to buy life insurance because they’re concerned that someone will have to pick up the tab for their numerous debts if they pass away unexpectedly.

Funeral costs tend to be a chief concern for these men and women—which makes sense, as these so-called “final expenses” can be shockingly costly. (LifeHappens.org recently estimated that the average funeral costs between $10,000 and $15,000.)

That isn’t the only form of debt Millennials should focus on while considering whether or not they need to invest in life insurance, though. Another, according to Ahmed, revolves around the student loans that many Gen Yers won’t finish paying off until they’re middle-aged.

“Who co-signed those loans? You have to think about that,” she says—especially because “a lot of younger people don’t always know who co-signed those loans and who, as a result, would be responsible for repaying them if something happened to you.”

Actually, Ahmed adds, “you have to think about any loans you have that are outstanding. Did someone in your life co-sign them, too?” If so, you may want to turn to life insurance to protect those loved ones in the event of your death.

And then, of course, there’s the credit card debt that a lot of people accrue by a fairly young age these days. “Is the credit card you use one that you got on your own, or is it [tied to] your parents?” Ahmed asks. If it’s the latter, you can make another addition to your list of reasons to at least think of buying some type of life insurance.

Add in other potential debts that could be passed on to survivors like mortgage and car payments and it’s easy to see why some people, regardless of how old or young they are, turn to life insurance to in the hopes of decreasing this particular burden on their family members.

As for When You May Want to Pass on Buying Life Insurance…

It was suggested earlier that there are times when a young person can feel completely justified in ignoring life insurance.

A good example is if you simply don’t have anyone in your life who would suffer financially if you were to pass away.

In such cases, it probably would be difficult for anyone but the most aggressive of insurance agents to come up with valid reasons for you to buy a life policy.

Also, some married couples without children are likely to have a hard time convincing themselves that they would benefit from buying a life insurance policy.

This is especially true when both spouses contribute fairly equally to their household income and even the untimely death of one wouldn’t result in a financial catastrophe for the other (because the survivor would be able to make do on his or her salary alone).

If there’s any question that the passing of one spouse would put an undue strain on the other, though, you may want to buy at least a modest amount of life insurance that can act as a financial safety net if need be.

All That Said, Young People Are Surprisingly Aware of Life Insurance (Although This Seemingly Doesn’t Prompt Many of Them to Purchase It)

Don’t take any of what’s said above to suggest that Millennials and other young people are completely unware of the existence of life insurance, by the way.

A LIMRA study from late 2014, for example, found that 75 percent of those who purchase employer-sponsored or -supported life insurance policies at this point are part of Generations X or Y.

Also, a slightly more recent study from the same organization revealed that “a majority” of the women and men who make up those same generations believe they need more life insurance than they currently own.

Unfortunately, just because a good percentage of the more youthful portion of the population knows that life insurance is something they can and even should buy to protect their survivors in the event that they pass away, that doesn’t mean everyone who should do so follows through with a purchase.

According to the second study mentioned above, less than 20 percent of those who consider themselves to be Gen X or Y say they’re likely to buy life insurance at this point.

Another LIMRA study, on the other hand, found that those in the previously discussed generations overestimate the price of life insurance by between 119 and 213 percent, respectively—which is unfortunate for both those “youngsters” and their loved ones, as the same piece of research also found that cost is what keeps most Americans from investing in this kind of insurance product.

All of this jives with what Root has personally experienced in his time as an insurance agent.

“I do think younger people tend to ignore life insurance all the way up to their mid-30s,” he shares.

As for why that is, Root says that he believes this type of insurance product only becomes top of mind for people after they’ve had to deal with one or more major life events— “and many younger people just haven't experienced how death can affect a family or [haven’t] thought about how it could affect them.”

Those who do purchase this kind of coverage earlier in life “either have experienced ‘financial scars’ or have felt the responsibility of taking care of those financially dependent on them,” he adds.

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