Life insurance for young adults is generally the same as for adults, but the reasons for purchasing it can be different. For adults, the goal of buying life insurance is usually to ensure their family is financially covered should they pass away unexpectedly. For young adults, it can be a smart way to lock in a great rate and start planning for retirement.
The little known secret about life insurance is that the best time to buy it is, well…yesterday. It’s never going to be cheaper for you than it is now, so it makes good financial sense to purchase early. Young adults will be able to lock in at a much better rate than older people, especially if they’re healthy without any pre-existing conditions. Once your health starts to deteriorate, you become more of a risk to insurers and it’s harder to get lower premiums.
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Life insurance is about so much more than the death benefit. It can be tough to think so far down the line when you’re young, but life insurance can be a great financial planning tool, if you use it right. We’ll dive into the best life insurance for young adults below, but your age can definitely work to your advantage in terms of life insurance.
The best life insurance for young adults isn’t the same as it is for older adults. There are two main categories of life insurance:
Term life insurance is typically less expensive, but only lasts for the set term of the policy (usually 10-30 years). Whole life lasts your entire life, until you pass away, but comes with higher premiums. Whole life also comes with a cash value account, which can come in handy for young adults.
Whole life insurance is generally the best life insurance for adults. Term life insurance only lasts a set term and then expires, and for most young adults, that term simply isn’t long enough. Whole life insurance lasts no matter how long you live, while giving you the chance to lock in lower premiums while you’re young and healthy.
There’s another subset of permanent life insurance called universal life insurance that might be a good fit for young adults too. With universal life insurance, you can adjust the premiums based on your needs throughout your life, which is helpful when you’re young and unsure about your income and career path.
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There are two main reasons you should purchase life insurance as early as possible:
Most insurance companies require a medical exam before they’ll insure you, which means you could end up paying more if you have any health conditions. Securing a lower rate before any conditions develop will save you a ton on premiums down the line. Once you have life insurance, your coverage can’t be cancelled unless you default on the premiums, so securing life insurance while you’re young and healthy can save you a lot of headaches when you’re older.
Another main reason to purchase life insurance policies for young adults is the saving component. If you’re not disciplined about saving for retirement, this can be a smart choice for you. Whole life insurance comes with a cash value account, meaning part of your premiums go towards an investment account that builds as you get older.
As with all investments, the more time you have to let that cash value account grow, the better it is. Buying life insurance as a young adult gives you maximum time to let that account grow and build you significant savings for retirement or to borrow against or draw from while you’re still alive.
While whole life insurance is generally more expensive than term life insurance, you will be paying premiums for a longer period of time, which works in your favour. Insurance providers can afford to give you lower rates as opposed to someone in their 50s or 60s.
With whole life insurance, you also don’t need to worry about the premiums increasing as you get older. Once you lock in that low rate as a young adult, you’re set.
On top of this, you can also find ways to save on your insurance premiums to make the payments more manageable:
These tips, combined with purchasing life insurance at a young age, will help you keep your premiums down over the years for affordable life insurance.
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While it might feel morbid to think about life insurance when you’re in your prime, it can seriously benefit you in the long run. While it might not feel like a priority now (especially while you’re still building up your income), it can net you significant savings down the line and help set you up financially for your future.
While you might not have dependents now, you could later in life so it makes sense to set yourself up for that now just in case. If you never have dependents, you can still choose to donate your benefit to a charity or elsewhere.
Whole life insurance is generally the best form of life insurance for young adults because it lasts your entire life and gives you a savings vehicle. Term life insurance is a great option, but it can be tough to know what length of term to choose and if it will be long enough.
Hollay Ghadery Hollay Ghadery is a writer and editor who is passionate about financial literacy as a means to personal fulfillment. Hollay has over 18 years of experience creating content about a range of topics related to personal finance, including insurance, investing, banking, and credit cards. When Hollay isn't writing, she's spending time with her four children, two dogs, and three goats.
