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August 20, 2020

Top 3 Reasons to Buy Life Insurance When You're Young

Here's the Gist

  • Life insurance is cheaper when you buy it young
  • Getting term life insurance as a healthy, young person can help you lock in cheaper life insurance rates for the future
  • Life insurance can give you peace of mind and significantly lighten the burden on your loved ones when you pass
  • It costs less than you think, a policy with $100,000 in coverage for a 25-year-old is only about $10 a month

When you’re in your 20s and 30s, you tend to have a lot on your mind: figuring out apartments, roommates, careers, dating, RRSPs/401k’s…yet most of us don’t bother to think about life insurance. And why should we? Millennials are still too young to worry about something like that, right?

Well, I hate to break it to you, but consider that thinking could be wrong. In fact, your 20s and 30s is often the best time to learn about and buy life insurance. That’s right, the time has come to learn more about life insurance.

So, without further ado, here are three reasons why you should buy life insurance while you’re younger.

Reason One: You Can Get Cheaper Rates

Like every type of insurance, life insurance gets more expensive as it gets more likely that you will use it. Car insurance is cheaper when you barely ever drive and never get into car accidents, health insurance is cheaper when you’re healthy, and life insurance is cheaper when you’re young.

Life insurance companies use this thing called a mortality table to check, statistically, how likely you are to die, which basically tells them how expensive you would be to insure. The younger you are, the less likely you are to die, and the cheaper your life coverage will be.

Here’s an example of the kind of mortality tables that we’re talking about.

Source: https://en.wikipedia.org/wiki/File:Excerpt_from_CDC_2003_Table_1.pdf

It’s pretty dry and numbers-heavy but the point is that it shows that your probability of dying in the next year at age 50 is more than four times higher than at age 30. Which means that a 30-year-old is far cheaper to insure.

Additionally, younger people also tend to be healthier and therefore less likely to have any pre-existing conditions or ailments that come with aging. That means you’re less likely to be disqualified from getting the life insurance you want.

The bottom line is that life insurance gets more expensive as you get older. If you buy a term policy now, which gives you coverage at a fixed rate for a certain period of time (or term), you can lock in lower prices than if you wait to get it until you’re older.

Here’s an example table of the kind of prices you can expect for term life insurance according to age. For the sake of this example, we’re looking at non-smokers with a $100,000 policy and a 10-year term.*

*Quote data from https://www.rbcinsurance.com/

As you can see, life insurance is a way better deal in your 20s than if you wait until you’re middle-aged or older to get it.

Reason Two: You’ll Be Taking Care of Your Loved Ones

As healthy, young people, we don’t tend to spend a lot of time thinking about what will happen when we’re gone. But the reality is that when we die - which we will - our loved ones, friends, and family will be left behind to deal with any mess that we leave.

In particular, if you have debt, like credit card debt, student debt, a mortgage, etc. - which so many of us do - somebody is going to inherit it. This is especially the case if your parents cosigned on your car loan or your partner is also on your mortgage loan. Life insurance can serve as protection for your loved ones from having to pay off your debt all on their own once you’re gone.

Reason Three: Peace of Mind

There are a bunch of things you have to do as part of becoming an adult, like getting your retirement fund going, paying off loans, making investments, and so on. Depending on your situation, one of the most important things on that checklist if getting life insurance. If you can get that box ticked off now, you’re going to be able to have the peace of mind of knowing that you’ve gotten it over and done with, taken care of, and can move on to other things.

And, honestly, it’s not nearly as expensive as most people think it is to get life insurance. According to a 2015 study by LIMRA, millennials tend to overestimate the cost of life insurance by a whopping 213%. Yet, most people who don’t buy life insurance don’t do it because of the cost. Those are some seriously crossed wires.

If you knew that life insurance can cost you as little as $10 a month (see the table above) and can take care of your loved ones after you’re gone, helping them deal with issues like funeral costs, income replacement, and debt, you’d do it, right? And if you knew that getting that insurance now, as a 20-year-old or 30-year-old, will significantly help you save money, you’d ask yourself, “What am I waiting for?”, right?

So… what are you waiting for?