Should Young Adults Invest in Life Insurance?
People that grew up during the Great Recession of 2009 are planning their lives very differently than their predecessors. They’re putting off large life events, things like starting a family, buying a house, and investing in life insurance. Many of them have grown up in a harsh economic climate, leading to an impulse to spend as conservatively as possible.
The Millennial Generation, known to some as “Generation Y”, are the young adults that will define our future as a nation, but according to a Pew Research Center Study, only about one in three Millennials are the head of their own household, a lower percentage since the 2009 depression that plagued American households.
This generation also faces a higher rate of unemployment and insufficient income, so it’s understandable that some expenses have to be neglected, but one shocking trend is that life insurance tends to be one of the first things to be put off by these financially-conservative citizens.
Al Schor, a field director working with Northwestern Mutual, thinks that this trend is due not only to conservative spending, but difficulty dealing with the concept of mortality and illness at such a young age. With few to no dependents, it just doesn’t make sense to many Millennials to start thinking about life insurance since the primary reason people buy life insurance is for the death benefit. Why would they need that protection now, when they’re in their physical prime?
Before making this decision, today’s young adults must first examine the entirety of life insurance – not just in terms of immediate importance, but in a way that takes their entire life into account. Taking out a life insurance policy early in life allows you to lock in premiums and death benefits right away, which can turn their cheap life insurance plan into a lucrative investment down the line. Many insurance companies offer whole life insurance, and with a policy like that, you can begin to build guaranteed cash value almost immediately.
Many permanent life insurance plans can also build cash value and become a stable part of your financial plan – a predictable reassurance that, should the worst happen, the money will be there. Even if, one day, you don’t need your death benefits, the cash value built over time can be used for other things, such as supplementing retirement. Many Millennials, though turning down life insurance, do want financial stability, and a well thought-out approach to life insurance is an impactful part of that plan.
Millennials must also grasp the concept of insurability. Not only are insurance companies more likely to insure a young, healthy person, but they’re also more willing to charge a low fee. The price of life insurance is based on many factors including type of policy, death benefit amount, age, and health, and as a young adult, the time is ripe to lock in an inexpensive and beneficial policy.
Schor leaves his clients with these words of wisdom: “Think of how much [their] lives have changed in the last five years. They’ve graduated college or started a career. They can’t presume to know exactly what’s going to, or not going to, happen in the next five years. They just need to establish short- and long-term goals and come up with the best plan on how to achieve them.”
When did you purchase your first life insurance policy? Would you have looked into policies sooner if you’d been able to predict the future? Feel free to share your experiences in the comments.