Do you need life insurance under 35?
Life insurance provides financial protection to a policyholder’s loved ones in the event of their death. How early should you get it?
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Samantha Kohn, Freelance Blogger
Life is full of uncertainties, but there’s one thing we know for sure – no one lives forever. That’s why people buy life insurance.
Life insurance provides financial protection to a policyholder’s loved ones in the event of their death.
There are different types of life insurance policies, but each boils down to an agreement between the policyholder and the insurance provider. The policyholder agrees to pay the insurer a monthly premium, and the insurer agrees to pay the policy beneficiaries a set amount of money in the event of the policyholder’s death.
Life insurance premiums vary based on a variety of factors, including:
- The type of policy: Premiums will differ significantly for term life and whole life policies.
- The size of the payout: Policies with higher payouts will cost more to purchase.
- The policyholder’s lifestyle and occupation: Are they a smoker? Do they have any chronic health conditions? Do they work in a dangerous job?
Many young people believe they have a long life ahead so purchasing life insurance is unnecessary. However, there are many reasons to consider purchasing life insurance at a young age – even younger than age 35.
Key takeaways on life insurance under 35
1. Life insurance is a valuable investment protecting a policyholder’s loved ones in the event of their death.
2. Purchasing life insurance at a young age is wise for several reasons, including:
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- Premiums are lower when the policyholder is young, and locking in at these premiums can save money over time.
- Many people under 35 have dependants like spouses and children who would need financial assistance in the event of their death.
- Many people under 35 have debts or financial obligations that would be passed on to a loved one if they die uninsured.
- Life insurance will cover the funeral expenses and other costs associated with a person’s death, so the burden will not fall on a loved one.
Depending on the policy, life insurance can build cash value over time.
3. It's important to evaluate the need for life insurance periodically and update policies as needed.
The main types of life insurance
There are many types of life insurance products available, but most can be categorized as either term life or whole life policies.
Term life insurance policies offer coverage for a set period of time (or term), and pay out a previously-determined death benefit when the insured party passes away. With a term policy, the policyholder has a choice to renew at the end of the term, but their premiums will likely increase over time as their level of risk increases with age.
Wholelife insurance policies (or permanent life insurance) offer coverage for the policyholder's whole life and pay out a previously-determined death benefit when the insured party passes away. With a whole-life policy, premiums will never increase provided they are paid on time.
Life insurance under the age of 35
While many people feel invincible in their twenties and thirties and death isn’t something they think about, in reality, people can get sick and accidents can happen at any age.
Purchasing life insurance is a valuable investment, even when death seems very far away. Here are some reasons why:
- Savings over time
Whole-life policies cover a person for the rest of their life with no increase in premiums, as long as that person pays their premiums on time. When a person is young and healthy they are more likely to qualify for low insurance premiums, and these savings can add up over time.
- Ensuring future insurability
The cost of insurance premiums is all about risk, and because healthy people will likely live longer than unhealthy people, they pose a lower risk for insurance providers. Some people have medical conditions that categorize them as so high risk they are unable to secure health insurance at all. Purchasing life insurance when a person is young and healthy can protect insurability in the future, making sure they’re covered if they develop health conditions as they age.
- Covering expenses
Many young people accumulate debt as they get established in life. Whether a person has student loans, a mortgage, or credit card debt, if that debt is unsettled and the person passes away their family could be expected to pay up. Purchasing life insurance can help ensure those debts are taken care of if something happens to the policyholder.
- Ensuring loved ones are cared for
Life insurance policies provide a payout to a designated beneficiary when a policyholder dies. Many people have dependents, or people who rely on them and their income to keep their homes and maintain their lifestyles. It’s important to protect the financial security of those dependents by purchasing life insurance.
- Build cash value
Some insurance policies can build cash value over time, which can be used as an emergency fund or source of retirement income down the road.
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The bottom line
There are many things for people under age 35 to focus on. This is a time when many people are purchasing a home, launching a career, and building a family. With all this going on, allocating money to a life insurance policy can often be pushed aside in favour of more immediate needs.
There are many benefits to purchasing life insurance when a person is still young. Premiums will be lower which can save money over time, debts will be covered so loved ones aren’t left responsible to pay them off, and dependents will be taken care of financially if a person they rely on passes away.
People under the age of 35 have many life insurance options available to them, and it’s important to speak to an expert to help determine the best policy for each unique situation. But remember – insurance needs change over time, so be sure to review each policy regularly to ensure current needs are still being met.