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Millennials: Why Purchasing Disability and Life Insurance Is a Smart Move
As a young adult, there are endless demands for your limited funds . . . rent/mortgage, student loans, homeowners/renters insurance, auto insurance, utilities . . . the list goes on and on. Unfortunately, you've got to get used to it, because those demands are all part (one of the bad parts!) of being a responsible adult. Other parts of adulthood include ensuring you're protected financially if you're unable to work and protecting your family members from bills upon your death.
You probably think disability and death aren't topics you need to concern yourself with at this age. However, plenty of us think that same way and unfortunately are proven very wrong.
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According to the Social Security Administration, more than 25% of individuals who are 20 years old now will become disabled before retirement age.
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40,200 Americans died in motor vehicle crashes in 2016.
Protect your income now
Hopefully, you're working in an enjoyable and rewarding career that you don't intend to leave anytime soon. But what happens if you have no choice in the matter? If you become temporarily or permanently disabled, you most likely will not have another source of income, but you're still responsible for paying your bills.
Given that most disabilities are not the result of work injuries, you probably won't be able to rely on workers' compensation insurance for financial assistance. Disability insurance provides the security you need by insuring your income—helping you replace your paychecks if you are injured or ill and unable to work. Though it depends on the specifics of your policy, disability insurance often pays about 60% of your normal salary, so you can avoid total financial ruin while you recover.
A typical long-term disability claim lasts almost three years. No matter how good of an emergency fund you may have, it's unlikely your fund can cover your living expenses for that long! Fortunately, the cost of disability insurance is quite low compared to the benefit of receiving much-needed funds. Even better, disability insurance generally is priced by age and health, so the younger and healthier you are, the less you'll pay for a policy. If you wait until you've already experienced a debilitating illness or injury, insurance companies may decline to cover you, since insurance is meant for unexpected situations.
Protect your loved ones upon your death
Young adults often think life insurance is an expense that can wait. However, like disability insurance, life insurance costs far less when you're young and healthy, and since you usually lock in a permanent life insurance rate when you buy a policy, buying when you're young can provide significant value over time.
If you were to die, you'd probably leave your spouse, children, and/or parents with a number of expenses to pay on your behalf. Life insurance is the perfect way to cover those expenses.
Unpaid debts
Think of what you owe in credit card, student loan, auto loan, and mortgage debt. Most debts are not forgiven upon your death, and if any of your loans (such as student or auto loans) were cosigned by your parent or your spouse, that cosigner is responsible for the entire balance if you die. These could be substantial amounts that may cause great hardship for the people you love most. A life insurance policy can provide the funds to pay off amounts you owe while sparing your family from repaying your debts.
Burial expenses
Regardless of how simple a service you'd request, funeral, cremation, and burial costs can be quite costly. The family you leave behind will pay about $7,000–10,000 in funeral, cremation, and burial fees to lay you to rest. Life insurance can provide a cash benefit that allows you to remove this financial burden from your family.
Future education expenses
If you have children, of course you want to provide for their needs now, but you also likely want to leave them funds to pursue the education of their choice in the event of your death. Life insurance provides a cash benefit that your children can use for college or other educational expenses when they're ready.
Related reading: The Difference Between Term Life and Permanent Life Insurance
You still may be thinking that the need for life insurance is a ways off. However, the benefit of buying today lies in the greatly reduced cost associated with your younger age. Life insurance premiums are based on factors such as your age, overall health, and habits. If you're a young, generally healthy nonsmoker, you can lock in very affordable premiums now. If you wait to buy insurance until you're in your 40s, your monthly premiums will be far higher, even if you're in the same health. If your health has deteriorated, expect to pay an even greater amount, assuming you're not totally uninsurable.
To evaluate your options and see how affordable disability and life insurance protection can be for you now, click here to get a quote from an insurance agent today!
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InsuranceJoan Cleveland, CLU, ChFC, REBC
Joan Cleveland, CLU, ChFC, REBC leads SWBC Life Insurance Company as President and CEO. With more than 30 years of experience in the life insurance industry. She holds her Agent licenses for Life, Accident, Health Insurance, and has multiple FINRA securities Licenses. Joan is a frequent industry speaker and media spokesperson. She is a member of the Board of Directors of the Consumer Credit Insurance Association, the Texas Association of Life and Health Insurers, as well as the Life Insurers Council. In addition, she is chair of LIMRA’s Strategic Marketing Issues Committee.
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