TABLE OF CONTENTS: What is Life Insurance? Why Life Insurance Matters in Your 20s-40s Locking in Lower Rates Protecting Your Loved Ones Covering Final Expenses Tax-Free Payouts The Cost of Life Insura...
Congratulations, you finally landed your first “grown up” job; now you’re able to enjoy the luxuries of living life as a single, young adult! Without a worry in sight, planning for your long-term future probably doesn’t feel like a huge concern at the moment, right? After all, there are brunches to be had and karaoke to be sung! And, even though you may be young, healthy, and dependent(less), there is a certain amount of planning that you should do—now—to ensure your (and your future dependent’s) future is protected.
Brace yourself; it’s time to have an adult moment (even more adult than the retirement planning lecture): life insurance should be a part of your current financial plan.
Here are a couple of reasons why, even if you are young and single, you should consider life insurance—even if at this point in your life, doing so may seem unnecessary and a bit like #GrownUpProblems.
Buy Now, Save Now…and Then
For starters, there’s the cost benefit of buying early—the younger you are, the lower the policy price may be. It’s kind of like the early-bird special of life insurance! Because you are further away from death (statistically speaking) than older consumers, you are considered a lower risk for underwriters; therefore, your policy can be less expensive. Furthermore, if you opt for a whole life insurance policy, you’ll have the opportunity to “lock in” the reduced rate now and keep it through the years as you age and become a higher risk to underwriters.
Take Advantage of Living Benefits
Many people may assume that life insurance can only be leveraged as coverage for final expenses, but there are other living benefits to life insurance, such as the accumulated cash value. As the policy accumulates cash value, it can be used to help pay for big purchase expenses like buying your first home, funding a post-grad education, or paying down current student loan debt. Planning a wedding anytime soon? The accumulated cash value within a permanent life insurance policy can help foot the bill. Kind of sounds like you’re taking part of a grand giveaway, doesn’t it?
The Disadvantages of Company Sponsored Plans
Now, let’s say you already have coverage provided by your company’s sponsored life insurance plan. Although that’s a great step in protecting yourself, many people don’t realize the implications that may come with leaving that job. Once employment is terminated, so is your coverage, leaving you to run the financial risk of going without protection until you find coverage elsewhere. Consider the paycheck contributions to date; those funds—now lost—could’ve gone toward a portable policy. This is not to say that a company-sponsored policy isn’t great, but you should also weigh the options of a privately owned policy.
One last point to keep in mind: although the need for life insurance is typically triggered by a life changing event—getting married, buying a home, or having a baby—life insurance at any point in your life should be a serious consideration. It’s often easy to overlook the importance of life insurance once you assume financial debts such as student loan or a car loan, but it becomes especially important if these loans were co-signed, as the co-signer will be forced to assume financial responsibility if you were to pass away. With a life insurance policy set in place, the monies could be designated to cover this debt, relieving a co-signer from the unexpected financial burden.
Life insurance shouldn’t be seen as a dreaded topic to discuss. Yes, the benefit won’t be completely fulfilled until the unfortunate happens; however, knowing that your loved ones won’t be burdened by your final expenses should give you peace of mind, and having that kind of forethought about your family’s future needs is a true sign of maturity.
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