Life insurance can be easy to overlook for current college students or young adults just entering the workforce. Young adults may think that life insurance is just for older people or that paying for life insurance is a waste of money. However, Gen Z is primed to lock in some of the best life insurance rates.
Gen Z’s perception of life insurance is changing, too, as 55% of young adults ages 18-25 said that COVID-19 influenced them to buy life insurance or get additional coverage.
In this article, we’ll explore the best life insurance policies for young adults and the benefit of getting life insurance at a young age.
Who qualifies for young adult life insurance?
Young adult life insurance is available to anyone who qualifies, though most policies require applicants to be at least 18 years old. Parents or older adults can get a life insurance policy for children under 18.
Opening a life insurance policy for someone under 18 can be a good choice in certain situations. Securing coverage while children are young can help protect the finances of their loved ones for years to come.
Which type of life insurance is best for young adults?
Everyone has a unique situation, and each type of life insurance best fits specific individuals. Depending on various factors, young adults will want to choose between term or permanent life insurance.
Term life insurance
A term life insurance policy lasts a specific period, usually 10, 15, 20, or 30 years. While a term life insurance policy doesn’t hold cash value, it does ensure that beneficiaries will receive a payout, known as the death benefit, if the insured passes away during the policy term.
Each term life insurance policy expires at the end of the term, so many young adults would benefit from a longer term, like 30-year term life insurance. With a 30-year policy, young adults can enjoy an extended coverage period without paying large monthly premiums. By the time the term expires, today’s young adults will potentially have the financial security to go without life insurance or purchase a more robust permanent policy.
Permanent life insurance
Unlike term life insurance, permanent life insurance lasts the policyholder’s entire life. A permanent policy also builds cash value over time, with a portion of each premium payment going toward building cash value that grows tax-deferred.
Because of the plan’s cash value, permanent life insurance policies are sometimes used for retirement savings. However, permanent life insurance policies come with higher premiums than term life, so it’s wise to explore options to choose the one that best fits both needs and budget. Visit our sister company, eFinancial to explore permanent life insurance options for young adults.
What does young adult life insurance cover?
When someone passes away, there can be various costs to cover – including some that might not seem obvious to someone who is young. A life insurance policy can help cover outstanding debt or sudden expenses, including:
- Funeral and other end-of-life expenses
- Medical bills and debt
- Private student loan debt
- Mortgage debt
- Estate taxes
- Childcare expenses
Some of these expenses aren’t common until later in life. For example, the first-time home buyer keeps getting older, setting a record high of 36 in 2022, according to the National Association of REALTORS®. That means the majority of Gen Z still has a decade or more before they’ll take on the financial burden of a mortgage.
Yet for those young adults who have bought a home or are paying off private student loans, the financial burden of unpaid bills could fall on loved ones, like parents, if they co-signed on those loans.
A life insurance policy can provide peace of mind knowing that these expenses, among others, are covered.
Is life insurance worth it at a young age?
Everyone’s situation is unique, but many young adults don’t have significant savings and may take on debt to get an education. While this is perfectly normal, it can lead to financial issues in the event of an untimely death.
Aside from protecting loved ones, young adults can reap other benefits from getting life insurance in their 20s. For example, young adults typically qualify for lower premium payments on life insurance policies. The younger and healthier someone is, the more favorable rates they tend to get from insurers.
For example, at age 25, a female in good health could expect to pay $20.88 per month for $500,000 in term coverage, while a female in good health that’s 40 would face a price of $26.97 per month for the same amount of coverage, an overall difference of around $70 per year.
A term life insurance policy can provide affordable protection until today’s young adults become financially secure.
Find the right life insurance policy for young adults
When it comes to life insurance, having a plan early in life can be a smart move. Of course, young adults may need to learn what type of insurance policy is best. A licensed insurance agent can help young adults explore options, get quotes for coverage, and figure out the best policy that will carry them into adulthood.
