Why Younger People Need To Get Life Insurance
As a retiree, you likely understand the need for life insurance, and you probably already have a significant policy in your name. Unfortunately, younger people do not always see the need for life insurance. Many believe other pressing matters must be addressed before considering — what many deem — secondary concerns.
Life insurance is not a secondary concern, especially for your loved ones. While many senior citizens have the privilege of owning policies to ensure their families are taken care of when they pass, younger people should be more concerned with holding policies to cover outstanding debts.
Student Loans and Familial Concerns
Many young people carry student loan debt — national averages suggest about $30,000 per borrower. In many situations, the student or graduate is not the only one responsible for paying off student debt. Many parents cosigned student loan applications, meaning they are on the hook if anything unfortunate should happen to their child.
Additionally, suppose a student or graduate is the only signer on the loan upon their death. In that case, the lender can go after the individual’s assets, meaning anything left to the family is vulnerable to collections. Federal student loans often die with the borrower, but private loans are different. A private lender can be aggressive in its pursuit of repayment.
Like student loans, if a family member cosigns the loan for a younger individual, they are on the hook if the individual cannot make the payments. The obligation for loan repayment will go to the living signer. Additionally, any outstanding debts or financial obligations will have precedence over a younger person's assets and estate before surviving family.
Life Insurance as a Safety Net
Life insurance is not for the benefit of the policyholder. Instead, an insurance policy helps to protect the decedent’s family against financial loss and responsibility. When a younger person obtains a life insurance policy that can cover all outstanding debts, their families will not need to worry about financial difficulties following their death.
Life insurance, then, is like a safety net for younger individuals rather than a gift to those left behind. By maintaining a policy, the policyholder ensures their family will not have to worry about any outstanding debts, even those they might have cosigned. Owning a policy also allows the youngster to leave their family any assets of value and importance; instead of risking prized assets being sold or collected as collateral.
Saving Money With Early Investment
For younger individuals, around 30-years-old, a 20-year term life policy with a $250,000 death benefit might only cost between $15 and $18 per month, depending on age and gender. Waiting to secure coverage gets more expensive the longer you wait, rising by 8% to 10% annually.
When looking into policies, there are two potential choices: term life or whole life policies. Term life policies are for a set period, typically 20 to 30 years. At the end of the term, if not renewed, the policy and all its benefits terminate.
Alternatively, a whole life policy provides coverage for your entire life, as long as payments are made on time. These policies are typically more expensive than term life policies, but they offer the benefit of accumulated cash values in tax-deferred accounts.
Most accountants recommend securing a policy equal to at least five to 10 years of your annual income. However, every individual has different needs and responsibilities, meaning that you should talk with a financial planner for the most accurate assessment of your needs.
Despite the assumption, life insurance policies are not only for senior citizens. Young people can also benefit from coverage. How do you feel about youngsters and life insurance? Leave a comment with your thoughts.