Potential clients often call us to ask, “Am I too young for life insurance?”
In many cases, if you are young and do not have any dependents, adding a monthly bill for life insurance premiums might seem a little foolish. However, purchasing life insurance when you are young and healthy helps save you a considerable amount of money in the long run.
If you’re fresh out of college and are currently interning or are unemployed, buying life insurance is probably not a priority right now. On the other hand, if you have student loans, have started your career, and/or have a family, life insurance is something that you should definitely have. If you are considering buying a home or starting a family in the near future, you may want to start considering life insurance now.
In this article, we’ll explain some alternative uses for life insurance and help you determine whether or not you need coverage.
Quick Article Guide:
1. Do I Need Life Insurance if I Don’t Have Any Dependents?
2. Life Insurance for Business Protection
3. Life Insurance to Leave a Legacy
4. Leaving Money Behind for an Inheritance or Final Expenses
5. Give Us a Call or Request a Free Quote Online
Do I Need Life Insurance if I Don’t Have Any Dependents?
The main benefit of buying life insurance when you are young and without dependents is that the premiums are much more affordable. By the time you reach your 40’s or 50’s, the cost of your life insurance will be 2-3 times more than if you were to purchase life insurance in your 30’s.
Life insurance is based on mortality risk, and as we age, we tend to have more health problems. Even if you are in excellent health, life insurance becomes more expensive as we get older because our life expectancy is shorter. In addition, Americans are more likely to become overweight or develop serious ailments such as type two diabetes, cancer, or heart disease. The bottom line is, the odds of something happening to someone in their 50’s is much higher than someone in their 30’s. Unfortunately, many people put off buying life insurance until they have a health issue or lose a family member.
While the potential to save money isn’t enough of a reason for most people to purchase life insurance, even without dependents, it may be prudent to purchase a life insurance policy if your parents have co-signed on your student loans and/or a mortgage. The reason behind this is that by having your parents co-sign these loans for you, they become fiscally responsible for the loans if something were to happen to you. The same is true for credit cards as well.
To avoid the possibility of leaving these debts behind, many young adults buy a 10 or 20 year term life insurance policy to cover these unsettled balances. If you pay the debts off before the policy’s term is up, you can simply cancel the coverage or let it lapse by stopping payments. There are no fees or charges if you decide to cancel your policy early.
Life Insurance for Business Protection
Everyone loves to hear the story of a young entrepreneur out to build themselves and their family a legacy. Life insurance can help you secure the funding you need to start a business. In fact, life insurance is often a requirement when applying for a Small Business Loan. I was in my early 30’s when we incorporated our insurance agency, and having life insurance provided our investors with the confidence they needed. If something were to happen to me unexpectedly, they would be able to retain the money they put up to help get us started.
In addition to helping your business secure funding, life insurance can also provide additional advantages for your business. If you’re currently in business or planning on going into business, a life insurance policy can provide your loved ones and business partner(s) with financial stability as well. If you were to pass away, the proceeds from your life insurance policy can be used to buy out your share of the business from your business partners, also known as a Buy-Sell Agreement.
Here’s a Real Life Example of a Business We’ve Helped:
Last year, we worked with two young entrepreneurs that were starting a law firm. Each attorney purchased a life insurance policy on their partner to fund a Cross-Purchase Buy Sell Agreement. If either of the business partners passes away, the death benefit from the life insurance policy would be used to pay their family for the share of the business they started.
Each partner purchased a $500,000 policy on each other, and if either of them pass away, the money from the insurance policy will be paid directly to their family to prevent the business from having to sell, shut its doors, or sell assets to pay off the other owner’s share of the business. It will also prevent their surviving family members from needing to work for the business to earn an income.
We have many small business owners that contact us about Buy-Sell Agreements. Depending on the number of owners your business has, the life insurance can be paid for by each business partner or the business itself. A Buy-Sell Agreement is designed to provide the heirs of the deceased business partner with a cash payout that does not affect the financial stake of the business.
If you have any questions about Buy-Sell Agreements, give us a call and one of our agents will be happy to advise you of all of your options. Helping other small business owners is one of our passions! We can also help you obtain the least expensive life insurance policy available to fund your SBA Loan, or key person insurance.
Life Insurance to Leave a Legacy
Life insurance can be used to create and leave a financial legacy behind for your family, your business, or even your favorite charity. In some instances, young people do have dependents and may purchase a life insurance policy in order to replace lost income. When you’re young and healthy, you can lock in a lifetime life insurance policy to leave a tax-free lump sum behind.
Here’s an Example with Actual Rates for Lifetime Coverage:
For this example, let’s assume that you’re 32-years-old and in excellent health. A $500,000 lifetime policy with guaranteed rates and coverage until the age of 120 would cost roughly $186.00 dollars a month. If you live for 65 years, until the age of 97, you’ll have spent about $145,000 on the cost of your life insurance policy.
When you pass away, your loved ones or business will receive $500,000 tax-free, more than 3 times the amount you paid into your life insurance policy. This policy will provide your loved ones with protection while you are alive, and ensure that they receive a generous return on the money you invested.
While this strategy isn’t right for everybody, if you have anyone that’s financially dependent on you, it’s safe to say that you probably need life insurance. A financial dependent does not necessarily mean having a spouse and/or children, it can be a significant other, elderly or sick parents, or even a disabled sibling. We also work with clients who are in a serious relationship with someone, but they haven’t tied the knot yet. In this situation, a life insurance policy will give you peace of mind that they’re financially taken care of if something were to happen to you.
We also offer term life insurance policies, and these polices are ideal for someone who is purchasing a home. Let’s use the example from above and say that you’re 32 and purchasing a $300,000 house with a 30-year mortgage. A 30-year level term life insurance policy will protect the life of your mortgage, and it will only cost you about $35.00 dollars a month. If you pass away before your mortgage is paid off, your family will not have to sell your home and move. In addition, as the mortgage is paid down, you may start a family, and the coverage that exceeds your mortgage can be assigned to them.
Leaving Money Behind for an Inheritance or Final Expenses
Some people will purchase a life insurance policy to protect their families in the event that they pass away unexpectedly. Although passing away at a young age is rare, the average funeral currently costs about $10,000 and this cost will be left behind for your loved ones. Additionally, you may also leave behind outstanding medical bills, car loans, or other final expenses that your parents or family will inherit if you were to pass. Purchasing a policy will help alleviate this financial burden.
We have also noticed that many people still haven’t fully recovered from the “Great Recession” of 2007-2008. Because of this, more and more people in their 30’s are contributing to their parents’ finances. If your parents rely on you for income, purchasing a life insurance policy is a great way to provide a safety net for them if something were to happen to you unexpectedly. If you outlive your parents, you can always reassign your policy’s beneficiary to your own family or your spouse.
If you’re not sure how much coverage you need, please feel free to visit our life insurance calculator, or give us a call. Our agents are here to help you save time and money, and we can find you the policy that best fits your needs.
Give Us a Call or Request a Free Quote Online
Purchasing a life insurance policy when you’re young and healthy does not prevent you from adjusting your coverage down the road if you decide to get married and start a family. If you need life insurance now, or think you may need life insurance in the future, locking in a low rate now will save you a considerable amount of money in the future.
If your needs for coverage change down the road, you can always purchase a supplemental policy rather than losing the low rates that you received on your first policy. No matter what your special circumstance is, our agents will be happy to assist you with your life insurance needs. By working with more than 60 top-rated life insurance companies, we’ll make sure you always receive the best policy at the lowest rates. We only work with “A” rated companies and we’re licensed to sell life insurance in every state. Best of all, our services are free.
Moreover, it is also very important to note that not everyone over the age of 30 is in need of a life insurance policy. If we don’t think you need a policy, we’ll let you know! Our agency is an owner-operated company and our goal is to find our clients the right policy at the most affordable price, which may mean not buying a policy at all.
Give us a call and one of our agents would be happy to help you assess your life insurance needs. We can be reached toll-free at 855-902-6494, or you can request an instant free quote online below.
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