Top 5 Reasons Millennials Should Consider Life Insurance Early

According to recent studies, nearly 40% of millennials have no life insurance. Among those who do, many are underinsured. While millennials are increasingly focused on financial goals like paying off student loans, saving for a down payment on a house, and building an emergency fund, life insurance often gets overlooked. Ensuring long-term financial security starts with making informed decisions early, and life insurance is a critical component of that plan.

Purchasing life insurance early ensures lower premiums and long-term financial growth. In this blog, we’ll explore the top five reasons why millennials should consider buying life insurance now rather than later. These include the advantage of lower premiums, protecting loved ones from financial burdens, building cash value, coverage against future health issues, and preparing for major life events with financial security.

In this article:

• How Early Life Insurance Saves Millennials Thousands in Premiums
• Financial Protection for Loved Ones
• Building Cash Value
• Coverage for Future Health Issues
• Financial Security for Major Life Events
• Frequently Asked Questions (FAQs) About Why Millennials Should Consider Life Insurance Early

How Early Life Insurance Saves Millennials Thousands in Premiums

Life insurance premiums are typically based on several factors, with age and health being two of the most significant. When you’re younger, you’re generally healthier, which makes you less risky to insure. Insurance companies often reward this lower risk with lower premiums. As you age, the likelihood of developing health issues increases, which can lead to higher premiums or even difficulty securing coverage. By purchasing life insurance in your 20s or early 30s, you can lock in a lower premium rate that remains constant throughout the life of the policy, regardless of any changes in your health status.

Let’s consider an example. A 25-year-old non-smoker in good health might be able to purchase a 20-year term life insurance policy with a $500,000 death benefit for around $20 to $30 per month. In contrast, a 45-year-old non-smoker with the same health status and seeking the same coverage might pay $60 to $70 per month or more. Over the life of the policy, this difference in monthly premiums adds up significantly.

The savings from locking in a lower rate early can be substantial over the years. For instance, if the 25-year-old pays $25 per month, their total premium payments over 20 years would be around $6,000. Meanwhile, the 45-year-old paying $65 per month would end up paying approximately $15,600 over the same period. That’s a difference of $9,600 money that could have been invested or used elsewhere. Additionally, if you opt for a permanent life insurance policy that builds cash value, the savings could be even greater, as the cash value accumulation starts earlier, potentially growing into a significant financial asset over time. Therefore, buying life insurance while you’re young not only secures your financial future but also ensures you do so at a much lower cost, freeing up more resources for other financial goals.

Financial Protection for Loved Ones

Life insurance isn’t just for those with children. Even if you don’t have kids, you might be supporting a spouse, helping out aging parents, or even sharing financial responsibilities with siblings. In the event of an untimely death, your life insurance policy can provide the financial support they need to cover living expenses, medical bills, or other financial obligations.

Millennials often carry significant debt, such as student loans, car loans, or a mortgage. While some student loans may be forgiven upon death, others are not, and cosigners (often parents or partners) could be left responsible for paying them off. Life insurance can help cover these debts, ensuring they aren’t passed on to your loved ones. This is especially important if you share a mortgage with a partner, as the loss of your income could make it difficult for them to keep up with payments.

Building Cash Value

Permanent life insurance is more than just a policy that pays out when you pass away, it’s also a financial tool that grows with you. Unlike term life insurance, which provides coverage for a specific period, permanent life insurance lasts for your entire life and includes a cash value component. As you continue to pay your premiums, a portion of that money is allocated to the cash value, which accumulates over time. This growing cash value can be a valuable financial asset, offering benefits that extend beyond the traditional role of life insurance.

The cash value in a permanent life insurance policy is a versatile asset that you can tap into for various financial needs. As it grows, you can borrow against it at low interest rates, use it as collateral for loans, or even withdraw it for significant expenses like a home down payment, starting a business, or funding your children’s education. In some cases, the cash value can be used to pay premiums, allowing the policy to essentially fund itself over time. This makes permanent life insurance not only a protective measure for your loved ones but also a strategic part of your financial planning, helping you build wealth and achieve long-term goals.

Starting this accumulation process early in life amplifies the benefits. The power of compound interest means that the earlier you start, the more your cash value can grow over the years. For example, if you begin a permanent life insurance policy in your 20s, you give the cash value decades to build, potentially resulting in a substantial sum by the time you reach retirement age. This early start not only maximizes the growth of your cash value but also provides you with greater financial flexibility as you age. This cash value of your permanent life insurance can be a significant asset that supports your financial security throughout your life.

Coverage for Future Health Issues

One of the biggest uncertainties in life is your future health. While you might be healthy now, that can change unexpectedly as you age. Medical conditions can develop over time, and as they do, obtaining life insurance becomes more challenging and expensive. By securing life insurance early, you lock in coverage at a time when your health is likely at its best. This means lower premiums and a guarantee of coverage that can protect you and your loved ones, even if your health changes in the future.

Consider common health conditions like high blood pressure, diabetes, or heart disease. These conditions often develop as people age and can significantly impact your ability to get life insurance or the cost of your premiums. For example, a healthy individual in their 20s may qualify for the best rates, but if they develop diabetes in their 30s or 40s, their premiums could double or more. By purchasing life insurance before these conditions arise, you avoid the risk of higher costs or potential denial of coverage.

Many life insurance policies offer riders that provide “guaranteed insurability.” This means you can increase your coverage later on without the need for additional medical exams, regardless of any changes in your health. These riders are particularly valuable because they give you the flexibility to adapt your coverage to your changing needs over time, whether you have a growing family, increased financial responsibilities, or other significant life events. 

Financial Security for Major Life Events

Life insurance becomes especially important as you navigate major life events like marriage, buying a home, or starting a family. These milestones often come with increased financial responsibilities, such as shared debts, mortgages, or the costs of raising children. Life insurance can ensure that your loved ones are financially secure if something happens to you. For instance, if you’re newly married and both partners rely on each other’s income to maintain your lifestyle or pay off a mortgage, life insurance provides a safety net that can cover these expenses. Similarly, as you start a family, life insurance helps protect your children’s future by providing funds for education, living expenses, and other necessities in your absence.

Even at a young age, life insurance plays a crucial role in estate planning and wealth transfer. It’s not just about covering immediate expenses; life insurance can also be a tool for ensuring your assets are distributed according to your wishes. For example, life insurance can help cover estate taxes, allowing you to pass on more of your wealth to your heirs without burdening them with financial liabilities. Additionally, naming beneficiaries ensures that your loved ones receive the benefits directly, bypassing the often lengthy probate process. This can be particularly important if you have young children or other dependents who would need immediate financial support.

One of the key advantages of life insurance is its flexibility. Life insurance policies can be tailored to meet your changing needs as you move through different stages of life. Whether you’re single and just starting your career, getting married, having children, or planning for retirement, life insurance can adapt to your circumstances. For example, you might start with a term life insurance policy in your 20s, which is cost-effective and provides coverage during your early working years. As your financial situation evolves, you might consider converting that policy to a permanent one, or adding riders for additional benefits like critical illness coverage. This flexibility ensures that your life insurance remains relevant and continues to provide the protection you need, regardless of where life takes you.

Frequently Asked Questions (FAQs) About Why Millennials Should Consider Life Insurance Early

Find a solution for what you’re looking for 

Choosing life insurance early lays the groundwork for a secure financial future, giving you and your loved ones peace of mind no matter what life brings. At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to ensure the best solution for you and your needs. We provide expert life insurance solutions, including no medical life insurance, critical illness insurance, term life insurance, and permanent life insurance to build the best package to give you the protection you need.

Contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia, Alberta, and Manitoba including areas such as Milton, Burnaby, Grande Prairie,  and Winkler.