Life Insurance for Millennials: 8 reasons Why You Should Consider Getting ONE early
Many people struggle to understand the need for life insurance. A lot of these people just outrightly reduce the importance of life insurance to death benefits. But while death benefit is a major part of life insurance, there are many other benefits that a life insurance policy presents, especially to millennials. Being a millennial means handling lots of financial challenges. These may include paying off student loans, saving for a house, raising a family, and covering daily costs. Getting life insurance early can be a smart financial step.
Life insurance isn’t only for the older folks with families. It’s also vital for young adults. It can offer a safety net for debt or provide financial support for your family. There are good reasons for young adults to think about this choice, and together, we’ll explore them in this post.
Unfortunately, many millennials under 30 don’t have health or life insurance. For younger people, life insurance costs less. It’s better and cheaper to get it sooner. To grasp the perks and explore insurance options for young adults, research is key. Also, chatting with a financial advisor is smart. They can help pick the right policy for you. Doing so secures your financial future and protects your loved ones, no matter what happens.
This article will dive into why millennials should not overlook life insurance. We’ll talk about how it’s cost-effective, reduces debt, and builds a legacy. Stick with us to uncover these crucial details for making a wise choice.
1. Cost of Life Insurance for Millennials is Cheaper
The cost of insurance is arguably one of the biggest upsides of buying life insurance early. Making this decision early is smart for millennials because it’s cheaper. Young, healthy people get lower insurance rates. This makes it easier and more affordable to get covered.
Young people get lower rates because they’re seen as less risky. They’re less likely to have health problems which means their insurance can be much cheaper. It shows that buying insurance sooner is smarter, especially with lots of life insurance misconceptions being peddled among young people.
A lot of young people think life insurance is too expensive. But getting it early locks in low rates. It protects against higher costs due to health or lifestyle changes later.
2. Life Insurance can help millennials with debt repayment
Life insurance offers debt repayment assistance for young professionals. Many are burdened with student loans and mortgages. Thus, it’s vital to look into life insurance for financial protection.
Less than half of millennials (53%) lack life insurance, even though 48% want it. This gap can cause financial strain for families if there’s an unexpected loss. A solid life insurance policy helps prevent debts from overwhelming loved ones. It provides debt repayment assistance, allowing families to heal emotionally.
Life insurance also acts as a key financial strategy for coverage for young professionals. Term life policies, in particular, are budget-friendly and provide ample coverage. A healthy 30-year-old woman might pay about $35 monthly for a $500,000 policy over 30 years. Such coverage eases the financial impact of debts, offering financial protection for survivors.
When you speak with your financial advisor, it is in your right to consider available options and compare multiple quotes. Finding affordable life insurance can help with debt repayment assistance. It also brings peace of mind and financial protection to families.
3. Life Insurance can Provide Financial Protection for Your Loved Ones
For millennials, getting life insurance is way more than a simple policy. It’s key for financial security for beneficiaries. A recent survey shows why it’s vital. Shockingly, 55% of Canadian millennials don’t have life insurance, putting families at risk.
For millennials with dependents—like a partner, kids, or parents—choosing life insurance is smart and thoughtful. It lessens future financial worries and helps your loved ones keep their lifestyle and dreams alive.
Life insurance is crucial, whether you’re the main earner or help with finances. For example, a 30-year-old woman who doesn’t smoke could get a $500,000 term 20 life insurance policy for under $25 a month. For men the same age, it’s around $33 a month. Such affordable rates can hugely help your family by covering up to $20,000 in funeral costs in case of death. Many times we have seen families go through financial stress while grieving the loss of a loved one. While life insurance cannot bring back a loved one, it can at least, ease the finances needed to give them a befitting burial.
Life insurance does more than cover funeral costs; it helps with debts and ongoing expenses. Using life insurance to pay off a mortgage is common. This action keeps your family in their home, stress-free, and sustains their lifestyle. It’s a better choice than standard mortgage insurance because of its flexibility and benefits.
Life insurance comes in two types: term and permanent. Term insurance is usually cheaper for young people, covering a set period. Permanent insurance offers lifetime coverage and might have a cash value feature. Your choice should match your goals and needs, but both types secure your beneficiaries financially.
4. Life Insurance for Millenials: Income Replacement
Life insurance is key for millennials worried about income loss. It helps protect them in case of severe work injuries. While many workplaces provide some sort of accident and disability insurance, it is not always enough protection for you and your family if an injury occurs. It is always smart to have an extra layer of protection that replaces your income in case of work injuries that prevent you from being able to work. Different types of accident and sickness insurance plans can provide adequate income replacement. You should explore these options with a licensed insurance advisor.
5. Life Insurance for Millenials: Living Benefits
Modern life insurance isn’t just about what happens after you pass away. It now includes living benefits. These can help you financially if you get very sick or hurt. Millennials often put off buying life insurance, thinking it’s too expensive or less urgent than other needs.
Living benefits become key when work insurance isn’t enough. For millennials supporting their families, coverage for critical illnesses, accidents, sickness, and dismemberment is crucial. It ensures they can handle both immediate and long-term financial needs. This makes managing health-related expenses less of a worry in case of an unfortunate event.
While your financial advisor or Insurance advisor is curating your life insurance plan, living benefits can be added in the form of riders. Life insurance riders that guarantee living benefits include:
Terminal illness rider
Pays out a lump sum if the insured receives a medical diagnosis that shortens life expectancy to 2 years or less depending on the time stipulated in the policy.
Critical illness rider
Pays out a lump sum if the insured is diagnosed with qualifying illnesses that have high medical costs and sometimes, shortened life expectancy. Illnesses covered are sometimes up to 25 including Cancer, heart attack, kidney failure, stroke, etc. Under this rider, the illness does not have to be terminal
Chronic illness rider
Pays out a lump sum if the insured is diagnosed with a chronic illness that prevents them from being able to carry out 2 to 6 activities of daily living such as bathing, eating, toileting, getting dressed, transferring, and continence.
Disability waiver of premium
This rider waives further payment of the premium while keeping the policy in force if the insured suffers a disability(a qualified illness or sickness) that hinders them from earning an income.
The riders mentioned above can be added to both a term life insurance and a permanent life insurance. However, there is one other living benefit that is peculiar to a permanent life insurance policy – cash value. A permanent life insurance accumulates cash value. Although Cash value may take a considerable number of years to grow into a usable amount, once it does, it can become a pivotal asset in your wealth-building strategy. In a permanent life insurance policy, the cash value of the policy can be withdrawn, loaned, or used to pay for insurance premiums in the future.
6. Life Insurance for Millenials: Legacy Building
For forward-thinking millennials, life insurance is a way to build a legacy. This path allows your care and influence to last longer than your lifetime. It shows your dedication to the next generations.
Life insurance helps with legacy planning in many ways. It can pay for your kids’ school, make sure siblings get equal shares of your estate, or help achieve long-held dreams. It’s not just for immediate money needs. It sets up a lasting future for your family.
Life insurance is also key for generational wealth transfer.
Here are some main ideas:
- It offers financial help to heirs.
- It ensures fair sharing of property.
- It builds a family legacy that lasts.
Millennials are now the biggest group and they know how important planning ahead is. The National Association of Realtors says they are 43% of people buying homes. This points to their big financial roles and dreams. Choosing life insurance for legacy planning helps them reach their money goals and take care of future family members.
7. Tax-advantaged Financial Planning Tool
Life insurance offers unique tax benefits, important for financial planning. For millennials, it boosts long-term financial strategies. Its tax advantages are not widely known but are very effective.
Some life insurance like whole life or universal life, avoid income tax on payouts. This offers big tax savings and protects your wealth. Since millennials have 34% less wealth than older generations, life insurance is a smart way to keep more of your money.
Life insurance also improves your financial plan by offering more saving options. While 67% of millennials save for retirement, few use tax-advantaged accounts outside work. Life insurance adds to your choices, alongside TFSA and RRSP in Canada.
Additionally, it makes passing on wealth easier and tax-efficient for your heirs. Less than half of millennials feel ready for retirement. So, it’s vital to use tools like life insurance for financial security. This ensures a better future for you and your family.
8. Funeral/End-of-life Expenses
Funerals can be unexpectedly costly, putting a lot of pressure on families. Life insurance offers coverage for funeral costs, making sure money is available for these expenses. A traditional funeral costs about $7,000 to $10,000, which is hard for families during tough emotional times.
Thinking ahead about end-of-life financial planning eases some stress. Insurance that covers funeral and burial expenses reduces financial worry for your loved ones.
Final Thoughts
Choosing life insurance is a big decision, especially for millennials. They’re dealing with lots of financial choices and big changes in their lives. Many think life insurance is more expensive than it is.
A big challenge for millennials is they think work insurance is enough. But this insurance often gets less as you get older. And it usually stops when you retire. Since many change jobs often, relying on employer insurance isn’t always safe. Having your own policy is a smarter way to make sure you’re covered consistently.
There’s also confusion about how complicated it is to buy life insurance. And some don’t think they need it because they’re healthy now. But getting it early on means cheaper payments. It’s a smart move for long-term money planning. These policies can change to fit your life as it changes, which is great for millennials.
To sum up, life insurance is more than just help when someone passes away. It helps with debts, replaces income, and can even offer benefits while you’re alive. Getting insurance early helps you as a millennial to secure a stable future. Life insurance can cover funeral costs and leave a legacy for your loved ones.
Ogunjobi Oluwamuyiwa Felix preferred to be called Muyiwa Felix, is a personal finance coach and Insurance advisor. He creates content that addresses the core of personal finance in Canada, the United States, and the world at large. Daily, he meets up with clients who are interested in financial risk management, income protection, wealth-building, retirement planning, and tax-efficient investing strategies.
