If you are like most millennials, you are probably thinking, “Why should I get life insurance? I’m young, fit, and healthy — life insurance is something for older people.
The truth is, there is never a good time to think about death. Millennials may think it is hard enough establishing a career and managing their personal life, without having to think about an event that is likely to happen in the distant future.
However, life can go by quickly. Before you know it, you will have a home loan and people depending on your income - if you do not already.
Make the smart financial decision for yourself, and those you love, by taking the time to plan for your future now.
Why is life insurance for millennials important?
Life insurance has a simple goal. It protects your loved ones financially after you are gone.
Were you to suddenly pass away, a life insurance payout can help your spouse and children stay afloat, or if you have student loans with parents as co-signers, the death benefit amount can help them pay off the loan without dipping into their retirement income.
Life insurance is a contract between you and the insurer. The insurer agrees to pay your beneficiaries a certain amount, should you die, given the policy is still active. Your loved ones are free to use the payout however they like. They can use it to pay monthly bills, clear debt, or cover future expenses.
Types of life insurance for millennials
There are two types of life insurance — term life insurance and permanent life insurance.
Term life insurance provides life insurance coverage for a set period, like 10, 20, or 30 years. If you die within the policy term, your beneficiary receives the death benefit. If you outlive the policy, you will not receive the payout.
Permanent life insurance, on the other hand, does not come with an expiry date. It lasts for a lifetime, as long as you pay the premiums. Many permanent life insurance policies also include an investment component — called cash value — which grows on a tax-deferred basis.
So, which one is right for you — term or permanent life insurance?
There is no one-size-fits-all answer to this question. Every family is unique — as should be their life insurance. Knowing the key differences between the two can help you decide which one is right for your financial scenario.
Term life insurance is easier to understand and cheaper to buy. On average, it costs five to ten times less than a comparable permanent life policy. But on the downside, it comes with an end date.
Term life insurance can be good for those who expect to build wealth over time and will not require the financial protection that permanent life insurance offers in their later years.
After 20 or 30 years, most people are likely to have fewer financial obligations. They will have paid off their mortgage, their kids will not be living with them anymore, and they probably will be able to self-insure any remaining dependents.
In short, term life is sufficient for most people who need life insurance. However, permanent coverage can be useful in certain situations.
For example, if you are the parent of a child with special needs, permanent life could make sense for you. Likewise, if you want a life insurance policy to cover your end-of-life expenses, it may be a better option. Permanent life insurance may also be the right choice for people who want their policy to include a savings component that they can access during their lifetime.
Reasons why millennials need life insurance
Here are two reasons why millennials need life insurance.
Millennials are more educated than other generations, with roughly 70% of them between 30 and 34 holding a post-secondary certificate. Along with a higher education degree, many millennials also carry a huge amount of student debt.
If something were to happen to you, this debt may be passed on to your family. Buying life insurance can help ensure your debt does not become your parent’s responsibility should you suddenly pass away.
If you have taken out a home loan, the last thing you would want is for it to become a financial burden to your family, should you pass away unexpectedly. Without your income, your loved ones may be forced to use their savings to pay off the loan. In the worst-case scenario, they may even lose the home altogether.
A life insurance policy can help protect your home financially, and help your family remain in your house after you are gone.
The benefits of applying for life insurance as millennials
The cost of life insurance goes up with age. Therefore, buying life insurance early can help you lock in a low premium rate for life or the next several years.
In some cases, signing up for life insurance early could also mean the difference between having coverage and not having it. You are young and healthy right now, so you will easily qualify for life insurance. But if you delay the buying decision and develop a serious medical condition, insurers may deny you coverage altogether when you do decide to get life insurance.
How to find the best life insurance for millennials
There are a number of life insurance companies in Canada for millennials, but you just cannot select any insurer. Look for a provider that excels within these three parameters.
Before you sign-up, do not forget to check the financial soundness of the insurer. After all, picking an insurance carrier that failed as a business, would mean not only a loss of your investment, but also having to buy a new policy at higher rates from another insurer.
You can get a fair idea about the financial stability of a life insurance company by looking at its AM Best rating. AM Best is an independent body that rates the financial strength of insurance companies on a scale of A++ downward. The higher the rating, the better off the insurance carrier is financial.
Electronic Application and Document Delivery
Did you know that the average life insurance policy takes up to six weeks for approval? If you are not prepared to wait that long, pick a provider that accepts online applications and delivers policy documents electronically. Such insurers boast much shorter processing times than those that rely on paper applications and snail-mail.
Rates Based on Health Status
An underlying condition does not automatically mean a hefty life insurance premium. Some insurers take a more lenient view of certain health conditions than others. If you have a pre-existing condition, like diabetes, shop around to find the best rate.
How much does life insurance for millennials cost?
Life insurance costs less when you are young. So, millennials have a definite advantage over those who are in their 40’s or 50’s.
If you are young and healthy, the premiums could be as low as a cup of coffee a day!
That said, life insurance premiums are always unique to the person applying for coverage. How much you will pay for coverage depends largely on personal factors such as:
- Age – You will pay less for life insurance in your 20’s than in your 30’s.
- Gender – Because men have a shorter life expectancy than women, life insurance costs more for them.
- Health – An underlying health condition can push your premiums up, as can being severely overweight.
- Smoking – Tobacco use is the leading preventable cause of death. If you smoke, you will pay two or three times more than non-smokers.
Among age groups, millennials usually receive the lowest premium rates. That said, different insurers will quote you a different figure for the same coverage. If you do not want to pay more for life insurance than you have to, speak to an independent insurance broker like Dundas Life. Our experts will help you find the right policy for your needs at the best price.
Life insurance is just as important for millennials as it is for older adults. While for most young people term life insurance is sufficient, those with unique needs may find permanent life insurance a better option. Whatever your needs are, you can count on Dundas Life to help you get the best value policy.