Generally, it is best to buy life insurance when you are still young because it will benefit you more in the future. But should I buy life insurance in my 20s? Most young people think it is unnecessary to buy life insurance in their 20s, but anyone can pass away at any age. Purchasing a life insurance policy will help your dependents cover several expenses, including burial expenses, debts, and other expenses.
While in your 20s, you are likely to qualify for a cheaper life insurance policy than when you are older. This is because life insurance companies consider young adults less risky to insure than adults. It is a mistake to think life insurance is only gotten by older people with families, but it doesn’t work that way. This write-up contains reasons why you should buy life insurance in your 20s.
Why You Should Get Life Insurance in Your 20s
The main reason for life insurance is to be financially protected against disastrous events. It is to protect your loved ones against financial hardship after you pass away. For instance, if you have a huge debt, whether from student loans or a mortgage loan. And you do not want it to be passed to someone else after you are gone, life insurance payouts can help cover these debts.
If you intend to have a family or you have a family who financially depends on you, getting a policy will keep them in financial stability after you are gone. Aside from death benefits, life insurance comes with other features like cash value, which can be borrowed or withdrawn while you are still alive, making it a good reason to consider this coverage.
Types of Life Insurance
There are two main types of life insurance: term life and whole or permanent life insurance. These policies are different from each other and work in two different ways. They can be purchased by anyone, even while in your 20s. Term life insurance is a type of insurance that covers only a specific period, usually 10 to 30 years. A 20-year-old can qualify for $200,000 worth of coverage at $20 monthly till the end of the term.
Whole life insurance pays a death benefit with no cancellation date. As long as premiums are paid, your dependents will receive a death benefit to meet several needs. However, you will need to be able to afford expensive premiums because it has higher premiums than term life insurance. Whole life insurance policies accumulate cash value savings, which makes it better for those in their 20s because they get a longer time to build up these savings.
Advantages of Buying Life Insurance in Your 20s
There are several benefits of buying life insurance while you are in your 20s. Aside from cash value accumulation, which will be beneficial in the future, the following are other benefits of buying this insurance in your 20s:
Lower Premiums
While in your 20s, you can qualify for lower premiums than when you are older. It is more expensive for an older person to qualify for cheaper premiums. After all, they are considered higher risks because they are closer to their last days. The rate of death for older people is higher than that of younger people, putting them at high risk of insuring.
Death Benefit
As previously stated, life insurance pays out a death benefit to your loved ones after you pass away. Your beneficiaries will be covered by your life insurance death benefit to keep them financially stable. And able to meet several needs like college, debt, and final expenses. However, buying life insurance in your 20s means you can accumulate more death benefits for your family after you are no more.
Accumulated Cash Value
If you purchase a life insurance policy in your 20s, your cash value savings will begin accumulation from then. And can be accessed later in the future even while you are still alive. Cash value accumulates for several years up to decades and can total up to hundreds of thousands of dollars in the future.
You may be able to increase your coverage later
Most policies require policyholders to take a medical exam to increase their coverage. Whole life insurance companies allow you to include riders, which allows you to increase your policy with no medical exams taken. If your family has a history of developing a medical condition, this is a good idea.
Disadvantages of Buying Life Insurance in Your 20s
While there are several benefits to buying life insurance in your 20s, there are other downsides to it. The best time to buy life insurance is while you are young and healthy. But ensure you take note of the following disadvantages while you purchase a policy:
- You may have a difficult time maintaining your premiums.
- You may have to pay premiums longer than when you are old.
- You may purchase coverage you don’t need.
- Your premiums may be better spent elsewhere.
Aside from these, it is best to buy life insurance in your 20s to ensure several benefits that come with it.
Is it Too Soon to Buy Life Insurance in My 20s?
This depends on certain situations. If you are still in your 20s without a family and you are not planning on starting one soon, life insurance may not be needed. It is ok to get one later in the future. However, purchasing one now can help you a lot later in life.