When you are in your 20’s you feel young and carefree. The last thing on your mind is buying life insurance. If you think of life insurance at all, you probably think a life insurance policy is only worth it if you have loved ones who are financially dependent on you. However, it is in our 20’s that we begin to prepare for our future career, family, and financial outlook.
As we grow our responsibilities will grow. That is a certainty. Buying life insurance as a young adult is a wise financial decision that can result in cheaper premium rates. And for those who choose a whole life policy, it could also mean affordable premiums with high earnings from the cash value component. Keeping inflation and the improbabilities of life in mind, how much will you be able to save for yourself and your family’s future if you wait till a later age to start planning your financial position.
Here are three reasons why younger adults should buy life insurance now.
Age is not just a number – When you look through the lens of life insurance, age is the most important factor that determines how expensive or affordable your policy will be. The second factor is health, and a 20-year-old is much healthier than someone twice their age and therefore, pays a lower premium. Since the premium stays constant throughout the term of the policy, your increasing income will make the premiums even more affordable.
Consider this example: a 20-year-old and a 40-year-old both purchase a term policy for 40 years. The younger person would have to pay an annual premium that is less than half of what the 40-year-old would pay for 20 years. The 20-year-old is covered for double the term but pays only half the amount of the total premium. That is the power of age.
The best solution to protect your family’s financial stability – Younger individuals at the start of their career, are likely to have limited savings. However, they probably have the highest number of dependents and liabilities. These could be parents approaching retirement age, younger siblings who need to be educated, or grandparents with critical ailments. Life insurance provides the best solution to protect your family’s financial stability. In the event of any unforeseen incident, insurance will protect your family’s future.
If something were to happen to you, your family would be at financial risk as the chance of having a contingency plan is much less at a younger age. Your life insurance can help pay off your debt such as credit cards, personal loans, or student loans. A cash value component is an investment feature of a permanent policy that can earn interest and grow. That cash value component is a living benefit.
Enjoy the benefits of compounding - Compounding is when both your base capital and the interest accrued on it are further reinvested to grow your wealth. The longer the tenure of your investment the more magnified are the returns. Compounding can increase wealth exponentially over a period of time, which is why it makes sense to purchase a policy at an early age. A lifetime income plan assures you a regular income that can tide you over as a contingency plan to fund expenses, help clear debts, supplement other income, or even plan for your retirement. Ensuring your future earning potential is more affordable and feasible at 25 than it is at 50.
The pandemic has changed how younger adults think about life insurance.A recent LIMRA study reported that in 2022, 44% of Millennials said they were more likely to purchase coverage within the next year because of Covid-19.The pandemic has shown that things can change overnight, so it makes sense to secure life insurance now.