Fact CheckedIf you are wondering: Should I get life insurance in my 20s? Then you are thinking about the future EARLY. Now that’s impressive, kudos to you!
You may be asking yourself why a 20-something needs life insurance anyway.
Let me tell you, there are some excellent reasons why people need life insurance in their ’20s, and I am sharing them with you right now!
Why Does Someone So Young Need Life Insurance?
Life insurance in your 20s is just silly, right? You’re in your prime and have a whole life ahead of you. What a waste of cash.
Ummmm, no. You can’t generalize about people or their situations. Life insurance in your 20s could be a smart idea for several reasons.
One of the things I love about my job is the changeable nature of every case.
Here are some excellent situations where life insurance is recommended in your 20’s.
1. Protecting Your Loved Ones
Life Insurance can protect your birth family and/or it can protect your chosen family.
As I mentioned above, everyone lives very different lives. Some people wait until their 40s to get married and have kids, while others start very young. If you’re a young parent and have started a family in your 20s, then life insurance is a must have.
…especially if you have a mortgage or debt and are responsible for paying the bills.
Sure, you’re young and fit, but things do happen. There is no excuse for young parents not to have life insurance as it is so affordable in your 20s.
2. Protecting Your Parents from Your College Debt!
College and university cost a pretty penny. Let’s say you decide to go to law school in the States, and your parents cosign loans, so you get some terrific rates.
The deal is as soon as you get that high-paying job, you’re taking over the monthly payments.
But what happens if you get an illness or have an accident and die prematurely? Your parents are responsible for the money owed. A simple term policy makes sure that won’t happen.
“Young and single 20-somethings probably haven’t thought much about life insurance, and that’s OK. If you’re 25 with no debt you probably don’t need a life insurance policy, Ginty says.”
But if you’ve co-signed a student loan with your parents, you may want to consider “getting a life insurance policy because you have a financial obligation that could impact your parents. If you suddenly died,” some private lenders have clauses in their contracts that require the loan balance to be repaid immediately. Your family may need
“a life insurance payout to cover that debt.
Or perhaps you help support other family members — siblings, parents or grandparents. What happens to them if you aren’t capable of covering their expenses? Do they depend on your income? If so, then taking out a policy is a good bet.”
Life insurance is confusing—here’s everything millennials need to know, CNBC.com
3. Young High Net Worth Entrepreneurs
There are so many variations when it comes to life. Another great example is entrepreneurialism.
A 20-something may earn a high income or own a VERY successful business. If that’s the case, there are corporate interests they may want to protect, and life insurance provides the perfect vehicle to do this.
You’re young, high net worth, have maxed out your TSFAs, have unregistered investments and invest in real estate. A whole life policy may be a good strategy to diversify your holdings and plan for tax liabilities into the future.
4. Establishing Future Insurability
As I mentioned above, health is typically good in your 20s. However, this can change radically as you age. Looking into protection while you’re young and fit can protect you later in life.
If you buy a policy with a guaranteed insurability rider, you can maintain protection even if your health circumstances change.
…without applying again or providing proof of insurability.
Another perk? If your policy has a conversion option, you can opt into a permanent one without providing proof of insurability if you want continued coverage past your term.
Nice!
What Type of Insurance Does a 20 Something Need?
Whether you are looking at the Average Cost of Life Insurance for a 20 Year Old & Up or any other age group, there are two main types of life insurance:
So, if you are wondering, “Should I get life insurance in my 20s?” Term coverage is the most affordable option. It gives you protection during a specific period and covers income replacement.
On the flip side, permanent insurance typically has a cash value accumulation feature, which means your beneficiaries are guaranteed a payout. However, it costs much more because a payout is guaranteed if you keep up with your premiums.
There is a time and place for permanent life insurance, but you have to fit a specific niche, such as:
- You happen to have an estate that needs protection from excessive taxes
- Tax shelters are maxed out, and you need something new
- You have a business or a child with special needs
Just remember that permanent insurance is a complicated product with many nuances, not to mention that it’s a considerable investment. You must get some excellent advice before signing on the dotted line. Call Policy Architects today!
Should I Get Life Insurance in My 20s? What’s the Cost?
One of the biggest misconceptions is that life insurance is costly.
This is why it’s so important for me to spread the word. Life insurance coverage—especially term—is extraordinarily affordable.
It makes sense. Life insurance is a business based on risk assessment. The closer you are to death, the more expensive your life insurance premiums will be.
If you’re an insurer, you want your underwriters to balance being permissive enough to attract business and strict enough to prevent your company from losing money.
So, if we look at the Average Cost of Life Insurance for a 20-year-old, insurers view them favorably as long as they’re in excellent health.
Let’s examine some sample term life insurance rates by age to understand better how this works!
BMO Non-Smoking Female, Standard Rating, 30-Year Term
For this example, I’m using relatively healthy women between 20 and 30 with a standard nonsmoking rating. I selected a 30-year term because it will provide coverage into your 50s.
 |
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| Age | $500,000 | $1,000,000 |
| 20 Year Old Female | $25.20 | $43.20 |
| 21 Year Old Female | $25.20 | $43.20 |
| 22 Year Old Female | $25.65 | $44.10 |
| 23 Year Old Female | $25.65 | $44.10 |
| 24 Year Old Female | $26.10 | $45.00 |
| 25 Year Old Female | $26.10 | $45.00 |
| 26 Year Old Female | $27.00 | $47.70 |
| 27 Year Old Female | $28.35 | $49.50 |
| 28 Year Old Female | $30.15 | $52.20 |
| 29 Year Old Female | $31.50 | $55.80 |
| 30 Year Old Female | $33.75 | $60.30 |
*Quotes above are for BMO 30-Year Term, monthly, Standard Class, non-smoker. Your rates may differ depending on your unique circumstances. August 2024
Sample Term Life Insurance Rates: Affordable Life Insurance 20 – 30 Years Old
Do you see those prices?
Considering that the average Canadian spends about $1600 per year on coffee, you can see how affordable life insurance is when you are young and healthy.
So, for less than $45.00 per month, our 20-year-old client gets $1 million of coverage until her 50th birthday! This protects her during her most vulnerable period, when she may have a family.
Not to mention, an option to convert her term to permanent coverage provides my client with guaranteed future insurability for life.
Should I Get Life Insurance in My 20s? Your Health
If you read my blog, you know your health is a big part of your premiums. Life insurance is a business, which means underwriters make it their business to learn everything about you.
If your health ailment impacts your longevity, the insurer factors that into your monthly payments, and you pay more.
The good news is that most of us in our 20s are super healthy. In fact, most carriers can underwrite people in their 20s on a non-medical basis. This means there’s an excellent chance you can apply for $1 Million of coverage and avoid having to undergo a life insurance medical.
Selecting the Right Company for YOU
If you take nothing else away from my articles, I want you to know that not all life insurance companies are created equal. This is one of the main reasons you should consult an independent life insurance agent.
We’re not tied to an insurer, so we can peruse offerings from the best companies in Canada.
Did you know some insurers are far more lenient for specific medical conditions than others? Yep! They all have a niche. For example, Ivari is known to be lenient regarding the build chart (your height and weight ratio).
So, if you carry a few extra pounds, they may be your insurer. But realistically for most 20 somethings, this isn’t an issue and I would guess a large percentage of life insurance applicants in their 20s will receive standard rates.
Choice of carrier is less of an issue in your 20s.
Should I get Life Insurance in my 20s – Bottom Line
Life insurance will never be cheaper to buy than when you’re in your 20s. If you think you might need it, it’s an excellent way to guarantee your insurability moving forward.
Perhaps you’ve just got married and you know you’ll be starting a family. Securing a life insurance policy in anticipation of this is a responsible thing to do. If you have dependents or people relying on you financially, a life insurance policy is a no brainer.
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