We’re here to break the news: You’re never too young to start thinking about life insurance policies.
As a young adult, financial planning is about building a solid foundation and investing in life insurance usually isn’t one of your top priorities. When you’re faced with car payments and student loan debt, it’s most likely the last thing on your mind. But, It saves you money; a lot of it.
Contrary to popular belief, life insurance isn’t something only for older people. Buying life insurance in your 20s is your financial future’s secret weapon.
What is Life Insurance?
Before we explain what a life insurance policy is, here are five essential terms you need to know:
- Insured: The person who’s covered by the policy.
- Beneficiary: The person, people, or institution that gets the money when the insured passes away. A policy isn’t limited to one person. There can be more than one name on the policy.
- Policyholder: The person who owns the life insurance policy and pays the premium to keep it active. Typically this is the same person as the insured, but they can be different.
- Premium: The money paid to keep the policy active. Failure to pay the premium will cancel the policy.
- Death benefit: The amount of money paid out after the insured’s death.
Life insurance is a way to provide financial support and protection to your loved ones after you pass away. All it takes is paying a monthly or annual premium to an insurance company for them to pay a tax-free amount of money to your beneficiary if you die while the policy is active.
The most popular life insurances available are whole and term. Term life insurance, typically the more affordable plan, is only active within a set period and doesn’t accrue cash value. In contrast, whole life insurance is a more permanent option that lasts your entire life as long as you pay the policy’s premiums. Cash value is accumulated over time.
The insurance can cover a wide range of expenses, including burial expenses, home labor expenses, living expenses for your family, college expenses for your kids, a co-signed debt like student loans, and more. Customize your policy to fit your family’s needs, the number of years you want it to last, and how much you want to be paid out.
Upon your passing, your beneficiaries must fill out a death claim form and submit it to the insurer. Once the insurer approves the claim, your beneficiaries receive the funds.
Low Life Insurance Premiums
Age isn’t just a number, especially in terms of life insurance. Typically, you will need to complete a medical exam before you are able to purchase life insurance. The age you buy your policy determines how expensive or inexpensive your premium is. Buying life insurance in your 20s often comes with lower premiums and reduces the total amount you spend compared to if you purchase in your 50s.
For instance, a 24-year-old is often much healthier than someone twice their age, therefore, pays a lower cost. Health plays a vital influence on how much you pay. Being young has its advantages. Stellar health and youth are closely connected. As you age, you naturally become less healthy, so lock in a lower premium early.
Pay Off Your Debt
Life insurance aims to mute any financial burdens that potentially develop when the insured dies. The lump-sum cash payment substitutes the income the deceased will no longer earn and helps with any lingering debts. If others depend on you financially, life insurance is crucial. Debt doesn’t die. Investing leaves your loved ones protected and secured.
Protect Your Future
You may not have children now, but you may in the future. Establishing a plan early means you’ll have protection for future dependents, like your spouse, children, and aging parents. If something were to happen to you, your policy ensures everyone continues to live comfortably.
There’s no such thing as the “right” age to buy life insurance–it’s a myth. No one likes to think about dying, but the sooner you invest, the better rate you’ll receive. Locking in at a low cost can keep you from paying high premiums later, as it becomes more expensive with each passing year. Coventry Direct can help guide you in the right direction. For more information, visit the Coventry Direct website. Consider the investment no matter your age.