Written by: Autumn Lax, CFp
Whether you’re a millennial, HENRY, young professional, or all of the above, you likely don’t typically think about life insurance. After all, in your late 20s and 30s, and you probably feel like your entire life is endlessly stretched out ahead of you.
You have all the time in the world to make big decisions about your life. Why think about something you might not need for hopefully many many years? I can tell you from my experience in working with young professionals, this could be a huge mistake and one that can easily be avoided.
First, let’s get into the top 5 reasons you should be considering owning life insurance if you’re a millennial:
1. Your age has a significant impact on the cost of Life Insurance. The younger you are the lower your premiums (that’s the amount you pay for insurance). Depending on the type of insurance you get, you may also be able to lock-in that good price so it doesn’t increase over time.
2. The younger you are, the healthier you are, generally speaking. Health is absolutely one of the most significant factors affecting your ability to get life insurance. This is why it is so important to consider getting life insurance early. Health issues can pop up unexpectedly, especially as you age, and certain conditions may mean you are uninsurable or could drive the costs so high it’s no longer feasible.
3. You can build wealth the longer you have it, in some scenarios. Some insurance policies build cash value in addition to loss of life protection. This cash value has tax advantages and can be used to build wealth over time, but it is most beneficial the more time you have. Thus, getting insurance early in life can also help you build wealth during your lifetime in addition to the benefit paid out after your life.
4. No matter where life takes you, you know you’re covered. Your occupation and hobbies could affect your insurance cost if you work in hazardous conditions or have hobbies that are deemed more dangerous, such as sky diving. However, once you get life insurance you are set, as long as you pay your premiums on time, even if your situation changes. Starting out young means that no matter where life takes you, you know you’re covered.
5. Give your loved one's financial protection. When people are young they are generally in an accumulation phase of life. This means you are in the process of building your wealth and may not have a lot of money in the bank yet. You are also in the process of accumulating costs. For example, a new house or starting a family. Adding life insurance during this earlier phase in life gives your loved one's financial protection during a time when you are likely to have the most debt and least amount of liquid assets.
Life insurance is more valuable and necessary than you might want to think about.
Let’s explore some key details about life insurance, what you should know about having this coverage, and where to go turn when looking to get this important coverage in your late 20s and 30s.
What Is Life Insurance?
Life insurance is meant to help take care of your dependents after you have passed away. It can be used for a variety of expenses such as funeral costs, to pay down debt or mortgage amounts, as a livable income for a spouse as they adjust to life without you, and can even go towards children’s education. The amount of coverage you'll want to buy will vary depending on how much your dependents will need your income if you pass on. This is definitely a conversation married couples in their 20s and 30s should have as soon as possible to make these important decisions.
Single People Can Have Smaller Policies
If you are single, you may still want to consider carrying a small policy that will cover your funeral expenses if you pass away. This makes sure that your relatives and loved ones don’t have to foot the bill on their own if something happens to you.
This is actually a very considerate reason for anyone to have life insurance. Some companies automatically give you a small policy with your benefits and insurance package at your job. Check with your HR department if you are unsure of what your company offers for you insurance-wise. You may not need to take out an additional life insurance policy if they already have something set up for you.
When Marriage And Children Come Into Your World
When you are in your 20s and 30s, married, and have children, it’s time to consider carrying life insurance. What you need may change as your income grows, you buy a home or other assets, and if your family multiplies with more children being born through the years.
Types Of Life Insurance
There are two basic types of life insurance policies you can obtain. One is called “term” and the other is called “whole” or permanent life insurance.
Term life insurance is paid out if the death of a person occurs within the time frame of the policy, usually within one to thirty years. A level term means that the death benefit stays the same throughout the policy’s duration. Most of the life insurance purchased is considered “level term.”
A whole life insurance policy is paid out whenever you die. It doesn’t have a specific time limit. Sometimes the premium goes up each year or starts out higher and may go down eventually as the years go on. Under this type of life insurance, there are quite a few variations in coverage, so make sure you get the one that’s right for you. Understanding all the ins and outs of your coverage may seem complicated, but it’s worth looking into so you completely comprehend what you are getting for your money.
A Certified Financial Planner™ May Be Able To Help
A Certified Financial Planner™ can help you determine how much life insurance you'll need to cover your family's needs in the event that something happens to you or your spouse. At Drucker Wealth, our Financial Life Planning process includes insurance needs analysis. It’s not just coverage for you. Many two-income families need to have life insurance for both spouses to make sure that the standard of living will continue for the remaining spouse and children if one partner passes away.
While some people may feel uncomfortable talking about life insurance, getting educated being prepared for anything that might happen, even in your 20s and 30s, is important for your future and the well-being of your (future) family.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
The views expressed are the views of Drucker Wealth Management and are not necessarily those of Hornor, Townsend and Kent, LLC(HTK). The information provided is for educational purposes only and is not intended as investment advice or a solicitation for the purchase or sale of any product or security. Investing involves risk, including the potential loss of the money you invest. Insurance and other financial products and services may be subject to certain terms, eligibility requirements, conditions and costs. Lance Drucker is a Registered Representative and Registered Investment Adviser of Hornor, Townsend & Kent LLC, (HTK), Registered Investment Advisor, Member FINRA (www.finra.org) / SIPC (www.sipc.org). 2 Park Ave, Ste 300, New York, NY 10016. 212.681.0459. Drucker Wealth Management and other listed entities are not affiliated with HTK. HTK does not offer tax or legal advice. Always consult a qualified professional for specific information regarding your personal situation. 3597712RB_May23