If you’re a young adult, you might be thinking about buying a home, paying off student loan debts, or taking your next vacation—not comparing life insurance quotes. However, if you’re curious about coverage options, you’re not alone. According to the Life Insurance Marketing and Research Association, 46% of Millennials and 49% of the Gen Z generation think they may need life insurance1. In fact, taking out a policy when you’re young could save you money and help you care for the most important people in your life. The following factors may keep young adults from considering a life insurance policy despite the benefits.
They’re worried about the cost.
While premiums vary across life insurance products, adults of all ages tend to overestimate the cost of a basic policy. 1 Some types of policies, like term life insurance, typically have affordable monthly premiums—especially for young people in relatively good health. Insurers base coverage costs on policyholders’ likelihood of passing away during the coverage period. So, as you age, new policies become more expensive. Applying while you’re young could save you money for decades, especially if you don’t have any chronic health conditions.
They might think they don’t need life insurance right now.
Many people associate life insurance with aging, but it could be a valuable financial tool for people from all walks of life. If you’re starting a family or hope to start one in the future, you may want to purchase a policy to provide your loved ones with a death benefit if you pass away.
You may also consider life insurance if you’ve recently bought a home. Your policy’s death benefit could help your family make payments if you pass away before paying off your mortgage. That way, you don’t have to worry about your loved ones losing their home if the worst-case scenario happens.
They prioritize other expenses.
If you’re already budgeting for rising housing costs, student loan payments, groceries, gas, and other bills, life insurance could be easy to dismiss. However, you may find that the peace of mind that comes with knowing your loved ones are covered is worth the additional cost, especially if you opt for a relatively affordable policy. You can rest assured knowing that your family and friends won’t have to scramble to cover funeral expenses or inherit student loan debts if you pass away unexpectedly.
They don’t know what to look for.
Finally, many young adults may not have life insurance because they simply don’t know where to start. Understanding some basics could help.
If you pass away during your policy’s term, the insurer pays out the lump sum death benefit to a beneficiary you’ve designated. You pay for a policy in monthly installments called “premiums.” There are several types of policies, but they typically fall under one of two categories:
- Term life insurance has a coverage term that lasts for a pre-determined period. If you pass away during that term, your beneficiary receives a death benefit.
- Permanent life insurance lasts throughout the end of your life and may accrue cash value.
Life insurance may not be right for every young adult. However, understanding your coverage options, misconceptions about cost, and how a policy may fit into your life could help you make informed decisions at any age.
Source:
1 https://www.limra.com/siteassets/research/research-abstracts-shared/2024/securing-the-future/2024-insurance-barometer—securing-the-future-infographic.pdf
