Blame participation trophies or the fact that many millennials entered the job market around the time the Great Recession hit, but millennials sometimes have a hard time shaking a reputation for being stuck in extended adolescence.
The truth is, the generation that coined “adulting” as a verb has been grown up for a while now. Most millennials have already seen our 10-year college reunion come and go, or we may face the shock of hearing we’re experiencing a “geriatric” pregnancy (at 35, really?). As your life grows to include more responsibilities and loved ones who depend on you, it’s time to consider whether life insurance might be the right next step.
A life insurance policy offers coverage to help financially provide for your loved ones if you pass away. You choose your term length (if you opt for a term life policy), coverage amount and life insurance beneficiary. As long as your monthly premiums are paid and the term isn’t over, your beneficiary receives a “death benefit” as a lump sum payment if you die.
Life insurance premiums are based on an assessment of your health, age and risky behaviors in your life (whether that’s smoking cigarettes or working as a stunt pilot). Getting life insurance at a young age can be a smart move to lock in lower premium rates.
“Millennials are not the youngest consumers of life insurance anymore. Many of them are moving out to the suburbs, buying homes and raising families. The older you get, the harder it is to qualify for life insurance,” says Raquel Murphy, vice president of Individual Life Insurance with HUB International Northeast. A 40-year-old will tend to face a higher premium quote than a 30-year-old with the same health status and risk profile because of how the underwriter runs your life insurance risk calculations.
Not everyone needs a life insurance policy, but lots of families can benefit from the financial security and peace of mind a policy can afford. Here are some top indicators that life insurance should be on your radar:
You have kids: The top reason most families go for life insurance is to provide for children. The plan is to be there for every family vacation, football game or opening night. Maybe you’ve daydreamed about celebrating your kids’ college graduation. If you pass away, your life insurance death benefit can provide funds your loved ones need to reach those milestones. (Here’s what you should know about life insurance for parents.)
You have a house: Turns out you can have your avocado toast and be a homeowner, too. Millennials may be behind other generations in terms of homeownership rates at age 30, but they’re also responsible for half of new mortgages, and millennial home purchases are climbing fast enough to narrow the generation gap. Life insurance can help ensure that your partner has funds to pay off the mortgage in a worst-case scenario.
You have debt: Credit card debt, student loans and other debts can make finances challenging. While federal student loans discharge if you die, some private loans won’t, especially if a parent co-signed on the debt. Factoring in life insurance coverage that can settle any outstanding debts keeps your family from facing those bills at a painful time. Life insurance can help pay off many different kinds of debts.
You want to break the millennial reputation for “killing the X industry”: Kidding! Mostly kidding. In a recent survey, millennials were the generation that expressed the highest interest in buying life insurance, and life insurance policy sales have gone up since 2019. Living through 2020 may have inspired more millennials to take steps to protect their financial future. No word on whether napkins are seeing the same renewed interest.
If there are so many good reasons to buy life insurance, why does this task end up at the bottom of the list? Misconceptions about the cost of life insurance can be an obstacle. Confusing application processes and the hassle of a medical exam might also make some people procrastinate.
“I do believe the market has not been very tech friendly, but I am seeing more streamlined application processes that will help many millennials overcome some of the hurdles,” says Murphy.
For example, online applications and the rise of no-exam life insurance policies can make qualifying for life insurance a quicker, simpler process.
Life insurance comes in two basic categories: term and permanent. Term life policies cover a specific amount of time (e.g., 20 years). If the term expires, you won’t be covered anymore. Whole life policies (the most popular type of permanent life insurance) cover you for your entire life, but premiums are much higher for the same amount of coverage.
Financial advisors take your cash flow into consideration when they recommend an insurance product to explore.
“First of all, for most families, the greatest need for insuring dependent income is during child-rearing years and ends when kids leave the nest. Plus, household income often tends to be limited during these early years, so level term should normally make up the greatest share of the death benefit amount,” says Rob Drury, executive director of the Association of Christian Financial Advisors. “However, if a life insurance need is for greater than 20 years, some form of permanent coverage is often more cost effective in the long run.”
Whole life and term life insurance both have their advantages, and you should tailor your insurance to fit your specific circumstances, in terms of coverage type and amount. It’s common, though, for young families to go for term life insurance to get affordable coverage. This allows them to reserve enough cash flow for retirement, college savings and activities they want to enjoy as a family.
Living through the last year and a half or so has been a crash course in uncertainty. Job loss, health worries and the bewildering world of hybrid school may all contribute to newfound interest in setting up what protective measures you can. Some survey results and financial advisors note that the pandemic has caught millennials’ attention when it comes to life insurance, although Drury points out that it’s always been an important financial measure to consider.
“The pandemic should be a total non-issue in life insurance planning. The possibility of premature death exists with or without it; however, the pandemic has opened many people’s, especially young people’s, eyes regarding this real possibility and its ramifications,” he says.
A life insurance provider can’t offer a guaranteed answer about what term length and coverage you need (sorry!). The upside is that you can choose between multiple options and determine what suits you best.
“Make sure that you have a long game approach to the product you’re buying as well as being aware of how much liquidity you have available to spend on insurance,” Murphy says.
Childfree millennials with 15 years left on a mortgage may choose a different term than parents of a 4-year-old who want to look ahead to college years. If you are considering more children in the future and want room to grow, or if you’re at the beginning of a 30-year mortgage, you might consider 30-year term life insurance. Think about not only your debts but your income and lifestyle — would your partner be able to cover monthly bills solo, and if not, what would it take to close the gap?
Whatever term length and coverage amount you choose, the goal is to be financially equipped to handle the unexpected for years to come.
Millennials have put their stamp on the world, from Facebook to representatives in Congress. As a millennial myself, I know I am so grateful that I took the life insurance plunge. For most of us, the most meaningful impact we make is our contribution to our families, and life insurance can be one more way to protect what’s most important to us.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards. This article has been reviewed and approved by a compliance professional who is a licensed life insurance agent.
Fabric by Gerber Life exists to help young families master their money. Our articles abide by strict editorial standards.
Information provided is general and educational in nature and is not intended to be, and should not be construed as, financial, legal, or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. We make no warranties with regard to the information or results obtained by its use, and disclaim any liability arising out of your use of, or reliance on, the information.
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