Millennials applying for life insurance can skip medical exams, simplify the process and pay less than they expect
American life insurance applications have increased in 2020 due to the COVID-19 pandemic, which has made us more aware about our mortality.
The under-45 crowd has shown the most interest in their life insurance gaps than anyone else. According to research by MIB Group (a data-sharing service for insurers), application activity for Americans aged 44 and under has increased almost twice this year than for Americans 45-59.
Younger buyers are often first-time applicants, digging into the details to understand how life insurance works. Here are some tips to help you navigate the application process and make the most of your new policy.
Not today, but tomorrow!
Many young Americans are still at the beginning of their financial journey. Over the next decade, jobs, homes, cities, and relationships will change. This means that needs and dependencies could change.
Faisa Stafford (CEO of the industry group Life Happens) stated in an email that while the question of who requires life insurance is personal, it is easy to determine if they need it. If the answer is “yes”, then life insurance should be considered.
She suggests focusing on two major issues: how to replace your income and how to repay your debts if your death is imminent. This means planning ahead to meet your financial obligations as you change.
A new homeowner could, for example, choose to skip mortgage protection insurance which would pay off your loan if your death occurs and instead opt for a term life insurance policy. Roslyn Lash is a North Carolina financial educator and author of “The 7 Fruits of Budgeting.” This means that your mortgage debt will decrease over time but your life insurance benefit remains the same. If you do die, you can use some of the money to send your child to college.
You can skip the medical exam.
Life insurance applications can be frustrating. To find out if your application has been approved, you might need to fill out forms and explain your medications.
This process is still possible, but there are simpler options. Stafford stated that life insurance has become more accessible because of the ease of online applications, no blood or urine tests and e-signature.
In a growing practice called “accelerated underwriting,” many insurers now rely on your prescription drug use, data about you from MIB Group and electronic health records to speed the process, according to the Society of Actuaries.
According to the National Association of Insurance Commissioners (NAIC), expedited applications can reduce approval times from weeks to hours. There is no need for a medical exam. The chances of approval for young buyers are high. There’s also almost no downside. If you’re not approved, most insurers will require you to take a medical examination.
Do not assume that life insurance is costly
It is a smart move to save money on your life insurance. The more you age, the greater risk you present to your life insurer. A policy for a 25 year-old will likely be more expensive than a policy for a 45-year old.
Many young millennials don’t realize the importance of purchasing life insurance when they are young and healthy. LIMRA, a life insurance trade association, found that half of millennials underestimate the cost of coverage. According to LIMRA, only 52% have life insurance even though 80% know they need it.
The 2020 pandemic provides new motivation. According to LIMRA consumer research, almost 3 out of 3 millennials felt that they have a greater need for life insurance because COVID-19 was introduced in October.
All you need to know is how much and how long you will need it. Consider the people who are dependent on you. What amount would they need to buy the house? What time would it take to get a job or finish school?
Stafford recommended that you start with 10 times your annual income as a guideline to determine how much coverage you need. She said that although finances can be complicated, a financial professional could help you determine how much coverage is necessary for your individual situation.