Buying life insurance when you are young is probably one of the smartest financial moves you can make! First, you will never be in better health than you are right now so pricing is the lowest you’ll ever see. Second, Life insurance is the ONE insurance that WILL pay off – because we all die!
With that said, it’s important to understand that the only insurance that will be paid off is one called “permanent” (vs. term) life insurance. A permanent policy lasts all your life and is the least expensive when you are young and healthy. There are all kinds of permanent policies – so give me a call and we can discuss which one might be best for you at this time in your life. Young and healthy folks can usually get a wonderful, “whole lifetime” policy that fits well within your budget.
Now let’s talk about a “term” policy. Term means that the policy is limited in time. Its only good for a short “term” (usually 10 to 30 years). A great example of when you may want to buy term life insurance might be to cover the mortgage on your home (so if you get a 30 year loan for $200,000 – for a few dollars a month, you can get a 30 year term policy for $200,000).
Here are 5 good reasons why a young person should consider a life insurance policy:
- Mortgage protection
- You have college debt
- You make more/less than your spouse
- You are young & healthy
- Time is on your side
Let’s explore each one a bit more:
1. Mortgage protection
We already talked about matching your mortgage loan with a life policy above. There are even products out there that “diminish” over time – so that the protection decreases as the mortgage balance goes down. These are extremely inexpensive but could drastically change your life if you (or your spouse) passed away unexpectedly. Imagine the grief your partner (and children) would experience on TOP of your death if they ALSO lost their house during the same time! Life insurance that pays off the house is the BARE minimum type of insurance that any responsible homeowner carries. With that said, I would NOT advise you to buy typical mortgage protection offered by the bank. When you buy your own, portable term insurance, you can take it with you when you move and keep the same, low rate as when you initially applied.
2. You have debt (and your parents are co-signers)
Many young folks have to take out loans in order to finish college. If your parents were kind enough to co-sign for you, please make sure you (or they!) take out a life insurance policy for the same time limit (term). It would be tragic if you died and your aged parents had to grieve AND go bankrupt. This can easily be avoided with a very reasonable policy. So as an example, if you have a student loan of $30,000 for 10 years – you can get a term loan for the same amount ($30,000) for 10 years. This type of loan insurance would be less than $10 a month. Well worth the investment and peace of mind.
3. You make a lot more money than your sweetheart
Let’s face it – often one partner makes a lot more (or less) than the other person in a relationship. Often the “bread winner” stays in the same career and in the job market and eventually makes a LOT more than the partner that stayed home with the kids. But that doesn’t mean the SAH (stay at home) mom/dad isn’t valuable! If the SAH person passes away, who is going to take care of the kids and help keep the household stable during the grieving period? And if the money-earner passes away, your family is going to be in SERIOUS financial ruins if the breadwinner doesn’t have an excellent policy in place. Sure – most workplaces offer a small life insurance policy (enough to get you buried and pay your salary for a year or two). But what then?! Don’t force your family into moving back with mom/dad or to another state. Buy life insurance. It’s very reasonable when you are young and healthy.
4. You are YOUNG. You are HEALTHY. You is smart… You is kind…
I know you might be repeating that line from the movie in your head right about now… but seriously, life insurance is the LEAST expensive (and you can lock in the rate for a very long time or forever!) when you are young and healthy. Chances are you WILL buy life insurance sometime in your life, especially if you are going to buy a house and/or have children. So get some now for your WHOLE life. Even if it’s the minimum (which is usually about $150,000 for a permanent policy). That way you HAVE it while you can GET it and get it at the bargain basement price. You can always add more as you add kids and homes. Not to mention – you *may* not always be so healthy.
5. Time is on your side.
When you are in your twenties (or thirties, perhaps even your forties) retirement and the end-of-life seems a long time away, and it is! You have the possibility of TIME to build up a very nice nest egg using the proper life insurance that builds up cash. Today’s policies range from very safe (very low interest) to investment grade (risky, but with the potential to earn a lot!) tied to stock indexes (like the DOW or S&P 500).
An advantage to term life insurance is that (with a policy from Hood Insurance Agency) you can convert it to a permanent policy at any time within the first 20 years and you will KEEP the health rating you got when you started the term policy!
It’s smart to seek out the advice of a professional insurance agent and let us help you explore the various options that might work best for you and your budget. Give me a call today and let’s set up a time so you can learn your options.