To buy or not to buy life insurance, that is the question on every young adult’s mind. Right?
Ok, maybe we exaggerated, but hear us out. There are many reasons why young people purchase life insurance, especially in their 20s and 30s. Major life changes – like buying a home, getting married, starting a family, or moving up the career ladder – are major motivators . Others are just proactive and want to lock in a low rate sooner rather than later.
Whether you’re in the first category of buying, the latter, or just plain confused, we’ve got you. Let’s dig into the benefits of buying life insurance as a young adult.
Life Insurance in Your 20s vs. 30s
As with most things, it’s usually better to get started early. If you’re in this bucket and wondering “should I get life insurance in my 20s” but thinking “eh, I’ll wait until I’m older,” it might be worth reconsidering. Life insurance is more affordable the younger and healthier you are. So, if you know you need coverage in the near future (to protect the finances of a spouse, partner, or children), the best time to buy a policy is probably now, so you can lock in a lower premium for the duration of your term policy.
For example, a healthy, 30-year-old non-smoking woman can purchase a $500,000 30-year term life insurance policy with Bestow for as little as $30 per month (based on data acquired on June 30, 2022).*
If you’re in your early- or mid-30s, it’s not too late. In fact, before you have the added expenses of a mortgage, car loans, or tuition is often the best time to set aside a budget for life insurance. If you qualify for coverage, you can set it up with recurring payments and practically forget about it. And if a bigger house or more kids come along, you can always purchase more coverage down the road if you feel you need more.
Below, we’ll go through the considerations you need to make as you’re evaluating whether you need life insurance now.
Do You Need Life Insurance As A Young Adult?
It depends, as is the answer to a lot of insurance and personal finance questions.
Because there’s no one-size-fits-all solution when it comes to buying life insurance coverage, you need to evaluate what your household’s needs are right now and what they may be in the future.
When You Should Consider Life Insurance In Your 20s
1. You Have Student Debt
Many people graduating college these days have student loan debt. Forbes reports more than half of college graduates leave school with student loan debt.
In 2022, 55% of students from public four-year institutions and 57% of students from private four-year institutions had student loans, with an average of $28,950 owed per borrower. If you only have federal student loans, you’re lucky, as those are forgiven if you die with a remaining balance.
Private student loans can be a different story – if you have any cosigners on your loans, be sure to read the fine print. In some cases, that debt becomes their responsibility. Life insurance can cover the cost of your loans if you pass unexpectedly, saving your loved ones tens of thousands of dollars.
Graduate students , and all students really, are particularly encouraged to get life insurance. You’re at the age where you might be married or have dependents, but likely won’t get coverage through work .
2. You’re in a Long-Term Partnership
Whether you’re married , in a committed relationship, or prefer not to attach any labels to your relationship status (hey, you do you), you may have someone who depends on you financially.
If your household depends on your income, a life insurance policy can provide some financial protection for your loved ones. After all, the death benefit – the amount of life insurance coverage purchased – is tax-free and can be used to pay for any expenses deemed necessary (more on that below).
Sure, savings can cover expenses in the face of an death, too. But why dip into a rainy day fund or retirement account when an affordable term life policy can take care of those necessities and more?
3. You’re a Job Hopper
Job hopping is a great way to get out of a job you don’t like or to increase your pay. However, there’s one big problem with job hopping. When you leave your job, you lose your previous employer’s benefits and likely won’t get benefits again until you find a new job. Getting life insurance can prevent you from having to purchase one down the line at a much higher premium.
And while that employer benefit might be a great one, it’s likely not a sufficient amount of coverage. Many employers offer some form of group life insurance benefit, but it is typically only a year or two of your salary, when most experts recommend much more coverage than that. Sometimes in the 5-10X annual salary range, based on debts and dependents.
4. Your Family Lives Paycheck to Paycheck
The loss of an income earner would have a terrible emotional and financial impact on your family in particular if they didn’t have a cushion. Without savings and investments, which are out of reach for a large group of Americans, your family might immediately face real hardship. How will they pay the rent or mortgage if your salary was covering that cost? Not to mention child care, healthcare, credit card payments and more day to day living expenses.
It may seem like a luxury to pay a monthly insurance premium when money is tight (and you should consult a financial expert about your situation), but if you can swing the monthly expense and are approved, you might be able to secure a lower premium that pays off big if you ever weren’t around to contribute to the family finances.
When You Should Consider Life Insurance In Your 30s
1. You Own a Home
Buying a home is a big and expensive milestone. The average millennial owes $232,372 on their mortgage .
Aside from your mortgage, there are the costs of maintaining your home, additional utilities, and perhaps even landscaping services.
If you have a mortgage, a life insurance policy can cover the balance of your loan plus any other expenses to keep a roof over your loved ones’ heads.
Homeowners often receive offers in the mail about mortgage protection insurance which certainly is an option. Just understand what you’re getting. Mortgage protection insurance is just what it sounds like: It pays the balance of the loan. And, unlike a term life insurance policy , it typically doesn’t offer a death benefit for your loved ones.
2. You Have Debt
Student loans , car loans, and credit cards – oh my!
The average millennial owes $27,251 in non-mortgage debt. Not surprising considering this age range also happens to coincide with child-rearing years and all of the final expenses that come along with it.
Whatever the reason for your debt, it doesn’t just go away after you’re gone. Your estate will owe that debt. And if the debt can’t be paid, it could mean selling any assets you may have left to your beneficiaries.
3. You Have Children (Or Are Planning on Having Them)
You’re likely to incur more debt when children are in your household. You get a bigger home, bigger car, want to fund once-in-a-lifetime vacations to theme parks… you get it. So, it’s especially important to protect your young family’s financial future if you’d like them to maintain your current lifestyle.
Stay-at-home parents may want to consider a life insurance policy as well. You have to think about the amount of work that is keeping your household together. Think childcare, cleaning, cooking, chauffeuring, tutoring, and any other thing your children take for granted now but will thank you for in about 20 years. Who would take care of all that if you were gone? Take all of these things into account as you try to calculate just how much life insurance you need .
Women, if you are pregnant or a new mother , you don’t need to wait to get a policy either. Plan ahead and lock in a monthly rate now while you’re young and in good health. You can get a term life policy online without a medical exam, so you don’t need to worry about abnormal lab results from pregnancy hormones impacting how much you’ll pay the insurance company for coverage.
The next step is knowing how much life insurance you need . For example, if you own your own home , you’ll want enough insurance to cover a good chunk of the mortgage to ensure that your dependents have somewhere to live. A licensed life insurance agent or financial planner can help you figure that out.
4. You Want a Good Deal
If you’re into great deals, then listen up. Life insurance as a young adult can be super affordable.
In life insurance underwriting (the process that determines whether you’re eligible for coverage and if eligible, at what cost), your age is a major factor. Generally speaking, the younger and healthier you are, the lower your life insurance premium will be.
Buying life insurance as a young adult is a steal because you can lock in a low rate for the next couple of decades, before you develop health issues like high blood pressure, heart disease, and diabetes.
What’s the Best Life Insurance For Young Adults?
While there are several different kinds of life insurance products, there are two main types of life insurance coverage – permanent life insurance and term life insurance.
Term Life Insurance Policies
Term life insurance is usually a simple and more affordable life insurance option. Pick a term policy and coverage amount, and your monthly premium payment stays the same throughout the duration of your term length.
For example, if you lock in a 20 year term or 30 year term life policy with $500,000 in coverage for $24 per month, you’ll pay that amount during that entire 20-year or 30 year term insurance policy. And should you pass away during your term policy and your beneficiaries receive the death benefit , they’ll get that $500,000 tax-free even if the claim is filed and approved on day 100 or day 7,000.
Permanent Life Insurance Policies
Another popular choice is a permanent life insurance policy, which includes two primary types of insurance – and universal life insurance policies. As long as you keep up with premium payments, permanent policies offer a guaranteed payout for your whole life, and some even offer a cash value.
Because of the added financial benefits of permanent life insurance policies, the monthly premiums can be much higher than those of term life insurance policies.
Life Insurance Rates For Young Adults
The life insurance cost in your 20s and 30s can be significantly lower than if you were applying in your 40s, 50s, and 60s. Especially as a non-smoker with limited health conditions, you may find a surprisingly low-cost premium rate that you can lock in for decades.
Average Term Life Monthly Premiums By Age
Quotes reflected below are an example Bestow, based on a 20-year term life insurance policy for a non-smoker in great health. This data was pulled on August 30, 2022. Your actual premium will be determined by underwriting review.
| Gender & Age | Monthly Premiums of $100,000 Policy | Monthly Premiums of $500,000 Policy | Monthly Premiums of $1,000,000 Policy |
|---|---|---|---|
| Female, Age 25 | $9.00 | $17.25 | $28.50 |
| Male, Age 25 | $11.42 | $27.25 | $48.50 |
| Female, Age 30 | $9.42 | $19.33 | $32.67 |
| Male, Age 30 | $11.58 | $28.08 | $50.17 |
| Female, Age 35 | $9.83 | $21.83 | $37.67 |
| Male, Age 35 | $11.83 | $28.92 | $63.50 |
| Female, Age 40 | $11.33 | $29.33 | $52.67 |
| Male, Age 40 | $13.92 | $38.50 | $71.00 |
Buying a term life policy as a young adult can be affordable and customizable. Maybe $500k isn’t the right amount for your needs. That’s fine, just buy more or less. It’s super easy to get, too. You can get quotes and buy coverage online without a medical exam in as little as 5 minutes. You can even do it on your phone.
Getting Started With Your Life Insurance Policy
Being responsible isn’t always fun, but the peace of mind is rewarding. If you knock out buying life insurance now, you can secure a lower premium upon approval, and rest easy for the next decade or more.
Bestow makes it fast and easy to apply for affordable term life insurance coverage online. Get a life insurance quote in seconds, and activate coverage today if approved.
* Quotes reflected are an example. Your actual premium will be determined by underwriting review.
