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Choosing Life Insurance

Should I Get Life Insurance in My Twenties?

2022-04-11

When you’re young and just starting out, life insurance is probably the last thing on your mind. However, there are several compelling reasons to think about buying life insurance when you’re young. With adequate coverage in place, you’ll breathe easier and be able to live your life more confidently. Read on to learn more about the features and benefits of life insurance for young adults.

Benefits of Life Insurance

Life insurance can be a smart financial move when you are young and healthy because you’ll likely pay lower premiums for your life insurance over the course of your life. It’s often easier to find a policy as a younger person, too. Not to mention, if you buy certain whole life insurance policies you may be able to accumulate a cash value with every premium payment that you make — over time that can really add up and you own that money.

Here are some common benefits for your beneficiaries if you have secured life insurance in your twenties.

Pay Off Debts

If you die unexpectedly, by definition you will leave behind unfinished business. For some, this means debts and other kinds of financial liabilities. Having a comprehensive life insurance plan in place that is large enough to cover your outstanding debts can help ensure that your loved ones are not saddled with a financial burden after you’re gone.

Don’t have any debts of your own? Life insurance could help pass on your legacy of prudent financial management to your beneficiaries by enabling them to pay off the mortgage on the family home, student loans, or other debts with the proceeds from your life insurance policy.

Safety Net for End-of-Life Expenses

Speaking of unfinished business, don’t forget that dying actually costs money but you won’t be there to pay the bill. Life insurance provides a safety net for medical bills or other end-of-life expenses, such as your funeral. Even the simplest of memorials can be an expensive burden on your family if you don’t have life insurance.

As a young person, death and estate planning may not seem relevant now. However, it’s important to remember that tomorrow isn’t promised to anyone. Accidents and illnesses can happen to anyone, at any age. Whether your beneficiary is your spouse or a parent, life insurance helps them feel they are not alone in paying off medical bills and arranging your funeral.

Tax Benefits

The death benefit from a life insurance policy is generally not considered taxable income by the U.S. government. Talk with your tax professional and life insurance provider about the tax implications of your coverage.

Types of Life Insurance to Consider

There are two main kinds of life insurance: Term and Whole Life.

Term Life Insurance

Term life insurance policies last for a certain amount of time or term. This could be 10, 20, or 30 years, or another term specified by your insurance company. Once the term of your policy ends, your coverage also ends.

A term policy’s purpose is to cover a set of specific events over a designated period of time. If you die during the policy term, your beneficiary will receive your death benefit.

Permanent Life Insurance

Whole life is a permanent life insurance policy that lasts throughout your lifetime, provided you pay your premiums as required and don’t cancel the policy. Permanent life insurance policies are more expensive than term, but they usually offer more benefits, such as cash value accrual, policy loans, and other financial benefits.

There are various types of permanent life insurance policies, but whole life policies are the most conservative and risk-free.

What Is the Best Life Insurance for Young Adults?

This is a bit of a trick question. Regardless of what kind of policy you buy, life insurance is a valuable safety net that protects your loved ones if you die prematurely.

Which Policy Has Long-Term Benefits?

The type of life insurance policy with the best long-term benefit is permanent life insurance with a cash value building feature. Having a policy of this kind starting in your 20s means you’ll have more time to accumulate value.

Which Policy is Less Expensive?

However, because of this, it’s also significantly more expensive than term life insurance. As a result, most people buy whole life policies with smaller death benefits that by themselves might not be sufficient to support a young growing family should you die unexpectedly. That is why most young people buy term policies because you get a much larger amount of coverage per premium dollar and it is easy to fit into your monthly budget. Some term policies include a feature that enables you to convert to a permanent policy should you want to in the future.

Finding the Best Policy for You

The true answer is that most people should have some of both types. While you’re in your working years earning money, you should have a term policy big enough to take care of anyone who depends on your income well into the future.

In addition, you should maintain a permanent policy that you can keep for your entire life and hopefully won’t pay out until you die at a very old age and it has earned a great deal of cash value to pass on to your loved ones. No matter when your time comes, your permanent policy will be there to help your loved ones cover your final expenses and cover any debts or other liabilities you may have left behind. Anything beyond that, they will be able to use as they see fit.

If you’re already enrolled in Servicemembers Group Life Insurance (SGLI) through the military, having supplemental coverage — term, permanent, or both — is often necessary. Taking the time to sit down and list what you need from a life insurance policy in both the short- and long-term will help you find the best option. Your future self and loved ones will be thankful you did!

How Do I Learn More?

AAFMAA’s Life Insurance team is here to help. We’ll take the time to understand your unique needs, answer questions, and guide you to resources that will help you make an educated decision. To learn more about life insurance for young adults, contact the Life Insurance team at 866-528-2075.

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