If you’re someone who has enormous debts, student loans, a mortgage, or other people dependent on your income, then buying life insurance is undoubtedly a smart financial decision.
For a person your age, shopping for a life insurance plan may not seem like an urgent matter simply because you’re young and healthy. After all, the very topic of insurance typically suggests an untimely death.
What Is A Life Insurance
To better understand how life insurance works, you need to know what it actually is first.
Life insurance is a contract between you and an insurance provider wherein the insurers agree to pay a sum of money to your listed beneficiaries in the case of your untimely death, provided you pay the required premium during your lifetime.
Life insurance offers financial protection to your survivors, mostly when you leave behind debts or if they depend heavily on your income.
The Younger, The Better
With all of the student debts you’ve acquired throughout college, an additional expense in the form of insurance may be the last thing you want to be thinking about. However, if you prioritize obtaining insurance at an early age, you’re actually saving more money in the long run.
Getting insurance while you’re young qualifies you to pay for lower premiums. As you grow older, you might experience health issues along the way. This can increase the cost of insurance, or you might even get disqualified from buying a plan. That being said, there’s no better time to buy insurance than while you’re young.
Protect Your Dependents
Death is terrifying. But, what’s even more frightening is that your debts don’t die with you. Your student loans, mortgage, and other obligations will carry over to your loved ones after your passing.
Your lender will still expect your co-signer to zero out your student loans. Usually, that’s your parents. Do you really want them to take on that burden?
If you’re married with kids, chances are you and your spouse combine incomes with living a particular lifestyle. The death benefits your survivors will help sustain that lifestyle as they deal with emotional loss and move forward in life.
If you had just purchased a home, life insurance could also help pay the rest of your mortgage. This can certainly ease the financial burden on your family in the case of catastrophic life changes. Mortgage life insurance is a type of insurance coverage designed to pay off the mortgage should the borrower dies before the loan is paid off. This is one way to ensure your family can stay in your home if ever you suddenly pass away.
Types To Consider
As you can see, having a life insurance is worth every penny. If you’re sold to the idea of getting one, there are two options you can choose from:
- Term Life Insurance
Term insurance offers coverage for a specified ‘term’ period. Premiums for term life insurance are usually cheaper than alternatives. The only downside is your money won’t accumulate cash value over time. And, when the term expires, the renewal rate may increase if your health deteriorates within the period.
- Whole Life Insurance
Whole life insurance is a type of permanent insurance that provides protection until death. Permanent insurance premiums are more expensive, but accumulate cash value over the years. Rates are also fixed, so if you buy in your 20s or 30s, you’ll be paying significantly lower premiums for the rest of your life.
Tips When Choosing Insurance
Married couples need life insurance coverage, which applies even if only one is working. If you consider utilizing your life insurance as an investment, it’s crucial to check the rate of return. Also, take into account the risk profile of underlying investments, ensuring they match your financial goals.
Check the following tips for choosing the right insurance for you:
- Check The Premium Amount You Can Afford: A lower deductible means a higher insurance premium or monthly payment.
- Check How Much Insurance Coverage You Need: Premiums are lower for less comprehensive insurance coverage.
- Consult An Insurance Expert: Talk to an insurance agent who can help you assess the type of coverage you need. Discuss the financial aspects of your preferred insurance policy, such as the coverage, monthly payments, and deductible.
- Consider Income Replacement: One of the essential factors when investing in life insurance is considering it as an income replacement. If you’re the sole provider in the family and bring in $50,000 a year, you’ll need a policy payout that’s sufficient to replace your income and as an additional guard to your finances against inflation.
Takeaway
Without question, buying life insurance is a huge commitment, especially for young adults who are just setting off into their careers. But, prioritizing it now while you’re young and healthy means you’re only committing a small amount of your pay check into something that offers far more significant benefits in the long run. Consider it an investment that benefits not only you, but also those who you’ll leave behind in case of an unexpected tragedy.
