Life Insurance for Young Adults
Young adults typically don't think about life insurance. After all, when you are in your twenties and thirties, you often feel like the end of your life is far beyond the viewable horizon. You think that have all the time in the world to make big decisions about your life and don't want to waste time now thinking about something you might not need for many years. But, this can be a big mistake. Life insurance is more valuable and necessary than you might realize. Let's explore some key details about life insurance, why you should have this coverage, and looking into getting this important coverage in your twenties and thirties.
What Is Life Insurance?
Life insurance is designed to help take care of your dependents after you have passed away. It can be used for a variety of expenses (e.g. funeral costs), to pay down debts or mortgages, as a livable income for a spouse as they adjust to life without you, and toward your children's education. The amount of coverage you need will be based on how much your dependents will need your income if you pass away. This is definitely a conversation married couples in their twenties and thirties should have as soon as possible so that they can make important decisions about insurance together.
Life Insurance for Individuals
If you are single, consider purchasing a small policy that will cover your funeral expenses if you pass away. This action ensures that your relatives and loved ones don't have to foot the bill if something happens to you. This is actually a very considerate reason for anyone to have life insurance.
Some employers automatically provide a small policy within the employee benefits and insurance package. If you are unsure about what your employer provides in terms of life insurance, check with your HR department to find out. You may not need to take out an additional life insurance policy if your employer already has something in place for you.
Life Insurance for Families
If you are in your twenties or thirties and have children, then it's time to consider purchasing life insurance. It's also worth noting that your needs may change when your income increases, when you buy a home or other assets, and if you have more children.
Types of Life Insurance
There are two basic types of life insurance policies: "term" and "whole" or permanent life insurance.1
Term Life Insurance
Term life insurance policies pay out when the policyholder dies within the time frame of the policy, and most policies run for 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."
Whole Life Insurance
A whole life insurance policy pays out whenever the policyholder dies. It doesn't have a specific time limit. In some policies, the premium goes up each year, and in others, it starts at a relatively high level and may go down over the years. There are quite a few variations in the coverage offered by different whole life insurance policies, so make sure you get one that's right for you. Understanding all the details contained in the small print of your policy may seem like a complicated task; however, it's worth spending the time and effort to completely comprehend what you are getting for your money.
A financial professional can help you determine the amount of life insurance that you should purchase now in order to cover your family's needs in the event that something happens to you or your spouse. That's right, life insurance can provide coverage for both spouses. Many two-income families need to have life insurance for both spouses to ensure that the standard of living will continue for the remaining spouse and children if one partner passes away.
While life insurance may not be a pleasant subject to talk about, being prepared for all eventualities is important for the long-term wellbeing of your family, even when you are in your twenties and thirties.
1. III.org, 2022