Most people aren’t thinking about life insurance in their 20s, but it’s often the best time to buy it.
There are many factors that influence the price of life insurance. However, generally speaking, the younger and more healthy you are at the time you purchase a policy will make it cheaper (unless you have a high-risk job, or are a fan of extreme sports).
Policygenius estimates that an average 20-something, or 30-something, non-smoker will pay between $10 and $50 per month for a term policy. The coverage amount can vary. This is less than what you would pay for a gym membership to ensure your family’s financial security in your absence.
Here are seven reasons why you might need life insurance if you don’t already have it.
You will have a baby
Now is the best time to purchase life insurance if you are planning on having a baby within the next year.
One thing is that most people age with a decline in their health. The higher the cost of a policy the longer you wait. If you have two incomes, the other parent will lose a steady salary to stay at home. This is why it’s important to establish a financial safety net prior to having children.
Life insurance is possible for women who are pregnant or have been married and are the sole breadwinner. However, Logan Sachon, a Policygenius insurance expert, says that you will get better rates if you take a medical exam prior to or after becoming pregnant.
Still, if you’re already carrying a baby and the need for life insurance feels urgent, some insurance companies will allow you to retake your medical exam a year or two after giving birth and then adjust your rate accordingly.
You are planning to marry
It’s a smart idea to purchase life insurance if your soon-to be spouse depends on your income to maintain the lifestyle you desire.
No matter how much they earn, having life insurance ensures that they will be able to maintain the same standard of living even if they die young.
Financial support for aging parents
It is a general rule that life insurance is necessary if your income is dependent on someone else’s.
Most people think of protecting a spouse or children, but according to a 2018 AARP Public Policy Institute report, about 6.2 million millennials and counting are acting as caregivers for a parent, in-law, or grandparent.
If you help out your aging parents, or plan to one day, a life insurance policy ensures they’re left with some money for long-term care or personal expenses if you can no longer provide for them.
You are in debt
Financial experts recommend that you include your total debts when deciding the coverage amount for your life insurance policy. This will ensure that your beneficiaries in the event of your death have sufficient funds to cover your outstanding balances. The largest debt for most Americans is a mortgage, but you should also consider your student loans, if you have them.
Private loans may not be forgiven if you die from student loans. If you have a co-signer on your private student loans or you live in a community property state, you may want to consider a life insurance policy.
You are the one who works for you
Life insurance can be incredibly beneficial if you’re a small business owner, Anna Baluch reports for Business Insider. Your key stakeholders and employees will still be paid if you create a “Key Person” policy or “Buy/Sell Agreement”.
Baluch was also told by Melbourne O’Banion (CEO of Bestow), that you can use your life insurance policy as collateral for a small business loan. The death benefit from your policy will pay off the entire loan in the event you die, and the remainder will be paid to your beneficiaries.
High-risk jobs are your job
When assessing your risk level, life insurance companies will always consider the occupation you work in. Simply put, someone who works in dangerous or high-risk environments has a higher chance of dying than someone who sits at their desk all day.
Jobs in aviation, construction, firefighting, mining, oil and natural gas, and a few others will almost always result in a higher premium, according to Policygenius. The policy is worth the risk.
Most life insurance policies won’t allow people in high-risk industries to add a disability rider, so Policygenius recommends buying a separate short-term disability insurance to protect against temporary loss of income if you get injured on the job or elsewhere.
Extreme hobbies are yours
A life insurance company will likely consider you a high-risk individual if you are a thrill seeker who is passionate about extreme sports. It’s like having a high-risk occupation. Although you will pay more for insurance, the price is well worth it considering the possibility that you will die from unnatural causes.
If you do have an extreme hobby — like rock climbing, scuba diving, or something equally thrilling — it’s best not to lie about it on your life insurance application, Policygenius explains. If your death occurs within the first two-years of your policy being active, and you don’t disclose any high-risk activities, the insurance company can reduce or cancel your death benefit.
The cost of insurance will typically include a higher base premium, or an additional annual fee that is a percentage your coverage amount. Each insurance company assesses hobbies risk differently so it is a good idea to compare prices if you are interested.
