Life insurance is an important part of personal financial planning as it can financially protect your loved ones’ from the immediate expenditures of premature death and even replace a person’s income by providing the necessary capital to provide the needed periodic income to the bereaved.
As personal insurance advisors, we often get asked, should I get life insurance in my 20’s?
While agreeably, you may not have much of an obligation when you’re in your 20’s but there are a lot of advantages to getting a life insurance in your 20’s and this article shows you why getting a life insurance policy in your 20’s is one of the best financial decisions you’ll ever make.
Reasons Why You Should Get Life Insurance in Your 20’s
Lower Premium Rate
As you may know, life insurance premium rates increase with a person’s risk of dying, which means the older the person is, the higher the premiums are. So deferring the purchase of your basic permanent insurance will cost you more than when you implement a basic life insurance protection in your 20’s.
Notice, I mentioned, basic permanent life insurance because it’s going to get more challenging to implement one when you’re older.
As a young person, with not much obligations, like small kids, mortgage and the like, you don’t need to implement a life insurance high enough to replace your income or one that provides the necessary funds to pay off a mortgage or other financial obligations when you’re in your 30’s and 40’s; those can be protected with a term life insurance policy later on.
In your 20’s, you need to secure your life insurance rates when they are dirt cheap. It doesn’t make sense to get a term life insurance if you want to secure your premium rates as they tend to increase every time you renew your term life policy.
Participating whole life insurance and universal life insurance policies allows for tax-free asset growth from within your policy while giving you (well, your loved ones) a lifetime (your lifetime) of life insurance protection of up to age 100 and these policies can be paid off in 15, 20-years or at age 65. You can also keep on paying as long as you live but the rates will not increase as compared to term life insurance policies.
Locking your life insurance rates in your early 20’s will give you much leverage when it comes to life insurance planning. Not only will you pay less in insurance premiums, but it also helps you build assets within your policy in the form of cash surrender values. So technically, you’re simply saving and/or investing money (depend on what type of plan) while being covered at the same time.
As a final note on this section, taking advantage of lower life insurance premium rates in your 20’s is by far the most convincing of all advantages of getting a life insurance in your 20’s.
Guarantee Your Insurability
Getting a life insurance in your 20’s guarantees your insurability. If you’re concerned about the possibility of being declined of life insurance coverage later in life, you have to implement a policy as soon as possible as getting a life insurance coverage while you’re young, not only guarantees more affordable premiums but also guarantees your insurability.
Say, you’re really just getting started and you can’t afford to finance a permanent life insurance policy, getting a renewable and convertible, term life policy helps you get approved while you’re young and once approved, you’re guaranteed coverage long term by renewing or converting your policy into a better plan later on.
While getting approved for life insurance doesn’t seem like a big deal to most people, there are a lot of people who actually gets declined not only due to health reason but also due to lifestyle.
If you’re a parent, and reading this, you need not wait to implement life insurance policies on your kids until they’re in in their 20’s. You can get a $100,000.00 worth of participating whole life insurance on your kids for $50 a month (or less), payable for 20-years, and that insures them for life, which they can also cash-out at old age, should they need the money.
Getting a permanent life insurance while your kids are young locks up excellent premium rates, and ensures their basic life insurance coverage should their insurability change in their adult years due to health condition or lifestyle choices.
Financially Protect Your Loved Ones
Life insurance is one of the best financial risk management strategies you can apply to protect your loved ones against unexpected spending in case of premature death.
Whether you’re still single or already married, you have loved ones that you need to protect against emergency spending in case of your untimely passing. Of course, this doesn’t mean that you’re planning to die young; this means that you care for your loved ones and that you don’t want them to suffer financial discomforts in the event of the worst-case scenario that you have to leave this world as everyone does, eventually.
The cost of internment in Canada ranges from $8,500.00 to $25,000.00, decent memorial costs somewhere in the middle of this range. Understandably, not all Canadians would have between $8,500.00 and $25,000.00 laying around for emergencies, so it’s a good idea to financially protect your loved ones by implementing life insurance in your 20’s even when you think you don’t have financial obligations to do so because, contrary to popular belief, young, single people do have financial obligations, and the most common among them is their own final expenses.
As a responsible person, don’t pass this obligation to your parents, spouse or common law partner.
Financial Peace of Mind
As mentioned, life insurance has the ability to replace a person financially by replacing the person’s income in case of premature death. Income replacement is vitally important to Canadians with families or young kids.
If you have a young family and you are working to support them, you are your loved ones’ most valuable asset.
As a breadwinner, you are your family’s money printing machine!
That machine with a soul prints money on a daily, bi-weekly or monthly basis, if you’re family loses that machine due to breakdown or loss, it stops printing money for them and their financial security is affected.
Getting an income protection life insurance in your 20’s helps protect your household income so that your loved ones can continue the same lifestyle even if you’re no longer around to provide for them, planning ahead pays!
This in turn gives you the peace of mind in knowing that if in case you pass away prematurely, you know you’ve guaranteed your children’s future.
Higher Approval Rate
Young people has the highest insurance approval rates, this is because most people who are in their 20’s (or younger, in general are in their best health.
People’s health may tend to change over the years due to stress, ageing or being inflected by illnesses, this posses challenges in getting approved for life insurance protection, and sadly a good chunk of life insurance applicants in their 40’s and 50’s may get denied from getting a coverage.
People who apply for their basic life insurance needs when they’re in your 20’s or younger, almost always get approved due to their excellent health condition.
Fast and Easy Underwriting Process
Since you have a high approval rate when you’re younger, the underwriting process takes lesser time than when you’re applying for life insurance in your older years.
There’s just not a lot of concerns in the approval process because the risk of death of 20 somethings is very low as compared to life insurance applicants who are older.
The average turn around speed for a life insurance application can take between 1 and 3 months. Children and applicants who are in their 20’s usually gets approve in 1 to 3 weeks.
One of the reasons that delay life insurance applications is when the underwriter asks for an attending physician statement or APS from your family doctor, this can sometimes take months for your doctor’s clinic to submit to the insurance company.
Another such reason that causes delay is life insurance underwriting MIB check, nope, not Men in Black but the Medical Information Bureau. This is when the insurance company run a check on your medical history and finds inconsistencies in your declaration and MIB records.
Yet another one but is an important part of the underwriting process is the actual medical examination, young people’s life insurance application are almost never subject to a medical examination for life insurance coverage amounts of less than $500,000.00.
Protect Your Creditors or Loved Ones from Your Debts
Life, as you may know by now, isn’t always a smooth sail, sometimes we hit some tides (or potholes) along the way; financially, this means incurring some form of debts either from a relative, friend or financial institutions; this can be personal or business debts, either way, you’re obligated to pay someone at a certain time.
As a responsible debtor, you can protect your creditor by implementing a life insurance protection, putting them as your beneficiaries so the debt is paid off in case of premature death, this is specially applicable if you’re indebted to a relative or a friend.
Another scenario where getting a life insurance protection in terms of loans is to protect your loved ones against the potential of a creditor running after them when you’re no longer around to pay it off.
Key Person or Buy-Sell Agreement Insurance
Whether you’re running a business on your own, co-own a business with other partners or you work in a business but your role is of vital importance that your premature passing will have a big impact on the business operations, you should implement a key-person or a buy-sell life insurance, so the company will have the necessary funds to hire and train a person of the same caliber as you for business continuation purposes or to pay off your share or your loved ones’ financial interest in a partnership or corporate entity.
This may or may not be applicable to you, I specially included this for all those young entrepreneurs who may be concerned about the success or continuation of their business in the event of an untimely passing or who wants to protect their loved ones’ financial interest in a company.
In the case of a buy-sell agreement, the life insurance policy provides the necessary funds for the partners or other incorporators to buy out your share in a company from your loved ones because your loved ones may not have the same skills as you do or they may not want to be in partnership with your partners.
Whatever the reason as to why you’ve searched information about whether or not if it makes sense for you to get life insurance in your 20’s. It could be your parents urging you to implement one while you’re young or a coming change in your life like living with a partner, having kids or you simply want to check out as to whether or not it actually makes sense to get life insurance in your 20’s; getting life insurance while your young will save you the most money when it comes to insurance planning as it will enable you to take advantage of excellent life insurance premiums rates while you’re young, lock up these rates by implementing a basic amount of permanent ($50,000.00 – $100,000.00) insurance that will cover you for life. This way, you’ll only need to implement term life insurance later on in life when you have more financial obligations to keep your risk management costs low.
Getting a permanent life insurance in your 20s also starts you off in you wealth accumulation journey as life insurance policies like participating whole life and well-funded universal life insurance allows for tax-free accumulation of funds within your plan, which you can cash out later on when you no longer need the coverage at old age.
In most instances, the cash surrender values of a participating whole life insurance and a well-funded universal life insurance policy will be more than a person’s actual capital contribution into the policy in a given 20-year period when they started young, provided that they are in good health condition, non-smoker and not into dangerous sports and activities.
If you want to learn more about how you can take advantage and implement a life insurance policy in your 20’s feel free to book an initial consultation with us and we’ll work with you in exploring the different life insurance options so, together, we can come up with the best solution that fits your needs.