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Buying Life Insurance in Your 20s and 30s

If you’re part of the Millennial Generation, buying life insurance may be the furthest thing from your mind. You may feel you don’t need it because you’re young, healthy and have other financial priorities. But this is the best time of your life to think about life insurance.
Here’s the bottom line: If someone depends on your income or would be stuck paying for your debts if you die, you need a life insurance policy. If you’re single and don’t have financial dependents or debt, you may not need life insurance right now.
Prime reasons to buy life insurance are getting married, starting or adding to your family or buying a house. But those aren’t the only reasons to act now. Buying life insurance will never be easier and more affordable than when you’re young and healthy.

Common Misconceptions About Life Insurance

A survey by the insurance industry proves that consumers of all ages generally overestimate the cost of life insurance.
Survey respondents were asked how much a $250,000 term life policy for a healthy 30-year old would cost. The median estimate was $500 per year, more than three times the actual average cost of $160. Millennials (ages 18 to 36) who took part in the survey guessed the cost was even higher: 44 percent figured such a policy would set them back $1,000 or more a year.
Also surprising, the survey found that 42 percent of Millennials thought they would not qualify for life insurance coverage. The fact is, Millennials are the most likely of any demographic group to qualify for the best insurance rates. As people age and are likely to face more health issues, rates rise.
Another insurance survey reveals that 84 percent of U.S. adults believe that most people need life insurance, but only 59 percent of people actually have a policy.
Here’s a closer look at the prime reasons to buy life insurance if you’re in your 20s or 30s:

Your Family and Dependents

The birth of a child is a primary trigger to purchase life insurance. But others may depend on your financial support, such as your spouse, a parent or a sibling. If you’re married and you and your spouse are both employed, the loss of your income would have a major financial impact on your family. Life insurance can help alleviate the stress. If you’re married and the sole financial provider for your family, it’s a given that their lives would be thrown into chaos if they suddenly lost all of the family income.
If you help care for a relative with special needs or if you help support a parent, a life insurance policy can help ensure your family can continue to provide for your loved one’s needs.  

Your Debts

Hardly anyone lives debt-free and you probably face some regular monthly payments like a student loan, credit card(s), mortgage or a car loan. It’s a common myth that all debt is forgiven when a person dies. In fact, many types of loans transfer to your survivors to deal with after you’re gone.
Any co-signer for a private student loan would be held responsible to pay off the loan. If you have joint credit cards with your spouse or partner, the debt continues and must be paid.
Millennials, in particular, often have co-signers for loans and credit cards because of short credit histories. Any loans that your family or close friends helped you get by co-signing would be their financial burden to deal with – not a nice way to return their favor.

Need for a Small Business Loan

If you’re starting your own business, a lender may require you to have one or more life insurance policies as a form of collateral. You may need to cover yourself, so the lender is assured the loan will be paid off, and your business may need to acquire policies on co-founders and key employees with unique skills and a high value. This assures lenders that the company can continue operations if the owner passes away.

What and How Much to Buy?

Since term life insurance is more affordable the younger and healthier you are, buy more than you think you need. If you buy a small policy now, and as your financial responsibility grows, you decide to increase the face value of an insurance policy already in place, premiums for additional coverage are priced on your greater age.
Next, if you’re buying life insurance to cover a 30-year home mortgage, look for a long-term policy. If you’re protecting financial support for your children, consider when they will reach a responsible adult age (usually after college or trade school graduation) and plan accordingly.  
Finally, get a policy that’s fully underwritten. Some insurers offer a “no medical exam” policy, or the ability to buy coverage without providing much personal information. These options, however, significantly increase the cost of premiums and limit the size of the policy. Take advantage of your youth and get the best rates available from a reputable insurance company to provide ample coverage for years to come.

If You’re Ready to Move Ahead …

This handy tool will make it easy for you to start making the right life insurance decisions for yourself and your family. It’s a calculator that asks you to input basic information and provides you with an instant recommendation for the amount of coverage you need and the length of your term life insurance policy.
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