For many millennials, life insurance is the last thing on their minds.
They’re mostly focused on tackling student loans, starting their careers, and maybe trying to squeeze in an adult milestone like buying a house or starting a family.
But financially savvy millennials should consider life insurance as a milestone in and of itself if they’re looking toward their financial futures. Here are a few things you should look for when considering a life insurance policy.
1. Buying life insurance when you’re young can pay off
Millennials might think that life insurance only comes into play when they take on a mortgage or start a family and have kids’ college educations to worry about. And it’s true that if they don’t have any dependents, life insurance might not be a priority. But people in their 20s and 30s can benefit by buying life insurance early.
- It doesn’t get any cheaper. Life insurance premiums increase by an average of 8-10% every year you don’t buy it. That doesn’t even take into account potential health issues that might pop up before you get around to applying.
- Not having it is a gamble. Don’t think anything bad will ever happen to you? For some, not being insured is a bigger gamble than buying life insurance and it never paying out.
- You might need it more than you realize. You might not think you have dependents, but are you still paying off student loan debt? Or do you have an auto loan? Do you have any co-signers on those loans? If so, not being insured leaves them on the hook in the event that you die before your debts are paid off.
- You can start on your other goals. Life insurance gives you peace of mind because unlike, say, the decades it can take paying off student loans, life insurance is complete right away – once you have it, your family gets the death benefit if you die. You can start on your other life goals without worrying that your loved ones could be saddled with any lingering debts you still have outstanding.
2. There are affordable life insurance options for millennials
Most people overestimate the cost of life insurance. If you’re between the ages of 25-35, you can expect to pay around $20-25 a month for a 20-year, $500,000 term life insurance policy. Would you consider cutting out a few cups of coffee or a couple of meals out every month for this financial safety net?
3. What do you need to do to get life insurance?
- Find a policy that matches your health. Life insurance rates are largely set based on the health of the applicant. If you have a medical condition like diabetes or cancer, you can get a policy at a competitive rate, but some companies are more accommodating for certain conditions than others are.
- Customize your policy with riders. Riders are small changes you can make to a policy to tailor it to your needs. For example, a return of premium policy can get your premiums refunded to you at the end of the policy term, and an accelerated death benefit rider lets you access the death benefit of a policy early in certain conditions (like in the case of terminal illness, to pay for medical bills).
- What can you do online? Electronic communication and updates to policies are more and more common these days, but some carriers still require some actions to be done by mail or phone calls.
- What is the typical timeline? The life insurance application process can take up to eight weeks, but some carriers are faster than others, especially those who offer accelerated underwriting.
4. So…do you need life insurance?
Life insurance is a financial backup plan, so there is not necessarily one way to secure your finances.
What alternatives exist?
- Savings: If a savings account is more your style, consider consulting a banker and make sure you know exactly how your money is being saved (and when you can/cannot access it).
- Investments: Ditto savings strategy for your investment strategy. Find a financial adviser you trust, make sure you know exactly how your money is being invested, and know when you get it.
- Other insurance policies: If you’re going to buy a home (probably your greatest asset, if not one of them), you’re already looking at homeowners insurance, and mortgage insurance can cover some of the scenarios that life insurance officers, including critical illness and death. Many employers, too, offer accidental death and dismemberment insurance, so if you consider life insurance primarily as a resource for your family in the event of your death, you could consider investing in AD&D. Coverage may not compare apples-to-apples with life insurance, so make sure you know the differences if you’re comparing the two.
For millennials deciding whether or not they need life insurance, a quick insurance checkup is an easy first step to figuring out your assets, debts, and insurance gaps to find out if life insurance can help secure your financial safety net.