Figuring out how to budget your money when you’re young and don’t have much is always a challenge.
It’s understandable if you feel like you can only handle the basics of survival – like food and shelter – and figure you can postpone things like setting up life insurance until you have a family who depends on you to provide for them.
In fact, that’s how most people think.
A 2017 survey conducted for TD[i] showed that 55% of Millennials do not have any life insurance at all, even though one third of them have thought about it.
The young respondents said the main reason they didn’t have life insurance was the cost (55%), and the second reason was that they didn’t have any dependents (37%).
But as so often happens in life, thinking a certain way doesn’t mean it’s based in reality.
In fact, there are three important reasons why you should consider life insurance when you’re still young:
1. You may pay less money over your lifetime if you buy young. It turns out that there is a direct correlation between the cost of life insurance and the age that you buy it. The younger you are when you buy your policy, the cheaper the monthly premiums will probably be. Not only that, but you may be able to lock in that lower price for longer. (Keep in mind that premiums for term life insurance normally increase in increments, such as every 10 years.) 2. You protect the people you care about when you buy life insurance early. Nobody can guarantee tomorrow – an illness or accident can claim you at any age. What would become of the people you care about if the worst were to happen and you had no insurance? One thing to keep in mind is that if you were to pass away, your debt does not get wiped out. For example, have your parents co-signed for your student loan, or a loan to purchase your car or house? They would be obligated to pay the entire amount borrowed. Your life insurance policy can give them relief from having to absorb all of your debt-load. 3. You may avoid risk of not being able to get insurance later. If you purchase life insurance when you’re young and healthy, and you keep up with your premiums, you can potentially have insurance for life. If you think you’ll wait until you’re settled down with a partner and have children, what would happen if you’re diagnosed with a serious illness in the meantime that may make you too big of an insurance risk? You may find that you can’t get the insurance you need (or can’t afford it).
As the survey showed, most young people think that life insurance exists mainly to cover the one-time cost of a funeral without realizing all of its other implications.
If you’re considering life insurance, research your options and consider your unique needs. Then speak with a licensed insurance agent who can help customize a policy to your individual situation.