Why Buy Life Insurance When You’re Young

Why Buy Life Insurance When You’re Young

If you’re just starting out, don’t own a home or have kids, and money is tight, you’re probably wondering, “why do I need life insurance?”

No matter how old you are, it’s never too early to start preparing for your future. There are several reasons why you should consider buying life insurance while you’re still young and healthy.

The Younger You Are, The Cheaper It Is

It’s no secret that insurance companies calculate risks and base premiums on the risk they are taking. So, it’s no surprise that the younger you are, the less risk there is for the insurance company. However, that’s not the only factor they are considering. They’re also calculating the length of time you’ll be paying for the policy. If they know you’ve got more years ahead of you, and will pay for the policy longer, the premiums will be lower.

While this is true for permanent policies – which will pay a benefit as long as you keep paying the premium – it is especially true for term life policies. Term life policies are sold for limited time periods (usually 10, 20, or 30 years). So, if the life insurance company believes there is a chance you won’t die before the term expires (and they won’t have to pay a death benefit), the price will be even lower. However, the protection is still in place during that term should the unexpected happen.

This is why age is one of the primary components life insurance companies use when calculating premiums. Every year you get older, the few remaining years you have left, so premiums will typically rise with age.

The Healthier You Are, The Cheaper It Is

Although age is a key factor in the cost of life insurance, health is even more important. Obviously, the risk is much less for an insurance company to insure the life of someone in excellent health, compared to someone in poor health. That’s why, when you apply for life insurance, they’ll ask about your lifestyle and habits. For example, smoking can have a significant impact on your long-term health and often results in much higher life insurance premiums.

Depending on the amount and type of life insurance you are considering, the insurer may also require you to submit your medical history and take a physical exam. Most diseases and health conditions tend to develop in middle age and later in life. So, you should consider getting life insurance while you are young and before any chronic health conditions appear. While buying life insurance in your twenties might seem young, health issues like high blood pressure and cholesterol often start to show up in your thirties and forties. These health conditions can substantially raise life insurance premiums, and more series health conditions may even disqualify you from being able to get life insurance altogether.

If you maintain a healthy lifestyle, some companies will offer discounts on life insurance based on your activity. Through the use of cell phones and technology, policyholders can give their life insurer access to diet, activity, and fitness tracking information. Based on that information, you may be able to earn discounts or a lower rate.

Why Would I Need Life Insurance so Young?

In the U.S., about 70 percent of college students graduate with student loans, amounting to 45 million borrowers with an average of more than $30,000 in student loan debt. If you have private student loans, there is a good chance that debt will not be discharged if something happens to you. A life insurance policy that covers these loans can help protect your loved ones from being burdened with them.

Similarly, if you’re starting up a business and take out a loan, the loan balance doesn’t die with you. The lender could seize your assets or the collateral used to secure the loan. Life insurance can help to make sure those assets are protected, or provide the business with resources to continue on after you are gone.

What Type of Life Insurance to Buy

There is no one-size-fits-all choice for life insurance, so speak with an insurance advisor to discuss options. You’ll first need to determine how much coverage you need, and there are plenty of life insurance calculators on the Internet to help you figure it out. Next, think about how long you’ll need coverage, and how much you can afford. With that information, the advisor an help you consider whether a term or permanent life insurance policy is right for you.

Since term life insurance policies are sold for limited time periods, they tend to have much lower premiums comparatively. With a set payment for a set period of time and a set amount of coverage, it’s a great option for covering large debts with an end date, such as student loans. If you’re just starting out, a term life insurance policy might be a more appealing option from a budget perspective.

Permanent life insurance does not end, and continues as long as you pay your premium. There are two types of permanent life insurance policies: whole life and universal life. Both provide a death benefit, as well as the ability to build cash value, which is why it’s often more expensive. Whole life typically has a set premium, while universal life typically offers some flexibility in payments. Buying a permanent policy when you are young gives the cash value of the policy more time to grow. Then it can be a source to borrow or withdraw funds from to help with emergencies, education costs, home improvements, or grow to help with retirement.

When you are young, life insurance protects the financial foundation you are building by protecting your assets, and the ones you love. In the case of permanent life insurance, it can provide this protection, and help you start building cash value. Talk to us today and take advantage of the benefits of getting life insurance while you’re young and healthy.


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