Many people who spend a good amount of time on healthy living and self-care see the future as a distant, far off event. Some millennials view death as physically impossible. The feeling of invincibility created by youth and passion leaves the idea of life insurance all but forgotten. Unlike previous generations, millennials see life insurance as a priority for a later day. However, buying your first home and building a family makes life insurance as important as any other priority.
Every millennial is different, and every lifestyle requires a tailored type of insurance policy. To make an informed decision about purchasing life insurance, you should understand what it is and why it is important.
What is Life Insurance?
There are two types of life insurance: term life and permanent life insurance. Term life insurance covers you for a specific period. This type of life insurance generally covers 10, 20, or 30-year intervals. With term life insurance, the coverage expires when the term ends, or the premiums are unpaid. The premiums for life insurance is the monthly payment made towards the life insurance policy. These payments cash out a lump sum to your beneficiary or dependents when you die.
Permanent life insurance includes universal, variable, and whole life insurance. Unlike term life insurance, permanent life insurance serves as a supplemental saving account with the minimum guaranteed interest accrued throughout your life. Permanent life insurance can be up to 10 times more expensive than term life insurance, which makes term life insurance more appealing for millennials living on a budget.
Do I Need Life Insurance?
To fully determine whether you need life insurance or not, you should ask yourself, “If I were to die today, would my family be financially stable?” If the answer to that question is no, then you need to invest in life insurance. Many millennials have student loan debt or some form of credit card debt. Purchasing life insurance can help your family pay for these previous debts, current living expenses, and the cost of the funeral when you die. A funeral costs between $6000 to $9000, and the right life insurance policy helps relieve the financial burden of death.
For your children or spouse, life insurance ensures they continue to live the lifestyle you’ve created for them. Whether you enlist an employer-paid program or purchase directly from a reputable company, life insurance protects your family and keeps them financially stable during a time of grief and loss.
How Much Life Insurance Should a Healthy Millennial Buy
Ask yourself, “How much life insurance do I need?” For you to determine how much life insurance you need, you have to understand what expenses the life insurance policy will cover. Do you need to cover all funeral costs? Do you need to pay a mortgage? Will the policy help pay for college tuition? The answer to these questions will help you understand how the insurance money is spent, which can help you decide how much life insurance you need. i.e., more expenses = more coverage required
You do not have to be wealthy to pay for life insurance. For example, a 30-year old woman in good health who purchases a $500,000 policy will generally pay no more than $40 per month for a 30-year term life insurance policy. (Use this term life insurance calculator to give yourself an honest estimate.) Permanent insurance or whole life insurance for the same person is at least $400 per month. Keep in mind, when you are younger and healthier, life insurance premiums are much lower than premiums later in life.
What Kind of Insurance to Buy
Term life insurance is the least expensive and least complicated form of insurance for millennials to purchase. By investing in term life insurance early on, millennials lock in affordable premiums and lower costs. In some cases, employers offer programs with minimal life insurance coverage. These policies provide up to 3 times your annual income for life insurance. Realistically, a millennial requires up to 12 times their annual income to ensure financial stability for their family. It is important to add, if the relationship with the employer ends, so does the life insurance policy with that employer.
To find life insurance policies on your own, you can get quotes from reputable online insurance companies. You can speak directly to an insurance agent on the phone or video chat to find the perfect policy for your unique situation. In some instances, a life insurance medical exam is not required to obtain coverage. Millennials should invest in life insurance early to guarantee the financial stability of their dependents or spouse in the event of an untimely death.