Life Insurance and Millennials — What to Consider Now

If you're in your 20s or 30s, life insurance is probably easier and cheaper to buy than you think.
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Written by Barbara Marquand
Senior Writer
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Edited by Mary M. Flory
Lead Assigning Editor
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Getting married, buying a house and having kids are all good reasons to purchase life insurance. But if other financial priorities keep getting in the way, there’s an economic consideration if you’re a millennial (no matter how much you hate being called one): Getting life insurance now is probably a lot cheaper and easier than you think.

Most people, but especially young people, overestimate the cost of life insurance, a study found, and a large portion of people in their 20s and 30s mistakenly think they can’t qualify. That’s according to the 2017 Insurance Barometer Study by Life Happens, a nonprofit supported by insurers and brokerages, and LIMRA, a global life insurance research and consulting group.

Do you need life insurance?

To decide if you need life insurance, ask this question: “Would someone be financially worse off if you died tomorrow?” says Rachel Podnos, a certified financial planner with Wealth Care LLC in Washington, D.C. If anyone depends on your income or would be stuck paying your debts, then the answer is yes.

Getting married, having children and buying a home are common triggers for buying life insurance.

You might also think about getting life insurance if you have private student loans. While federal student loans are discharged when the borrower dies, rules vary by lender for private student loans. Parents who cosigned private loans would be on the hook for the debt if you die and the lender required payment.

If you’re single and don’t have financial dependents or debt that would burden others, then you probably don’t need life insurance.

You don’t have to be rich to afford it

When respondents in the insurance survey were asked how much a $250,000 term life policy for a healthy 30-year-old would cost each year, the median estimate was $500, over three times the actual cost of $160. Millennials in the study, ages 18 to 36, guessed an even higher amount: 44% pegged the cost at $1,000 or more a year, compared with 29% of older respondents, the insurance study said.

“Many people don’t look for life insurance because they think it’s too expensive,” says Marvin Feldman, president and CEO of Life Happens.

Millennials have a big shopping advantage now because prices go up with age, as life expectancy decreases and the chance of developing health problems increases.

Meanwhile, the insurance study found that 42% of millennials think they would not qualify for coverage, compared with 24% of Generation X (ages 37-52), 20% of baby boomers (ages 53-64) and 15% of seniors (ages 65 and older) who didn’t think they could get insurance. But millennials, the youngest group, are the most likely to qualify for the best rates.

How much and what kind to buy

There are two main types of life insurance: term and permanent, such as whole life. Term life insurance covers a certain period, like 10, 20 or 30 years. Permanent coverage lasts your entire life. Term life insurance is the least expensive and simplest to understand, and it’s sufficient for most families.

The idea is to buy a term that lasts until the kids are grown up, the house is paid off and you’re well-established financially. To pinpoint the amount to buy, think about your financial dependents’ future needs.

“It’s not a one-size-fits-all analysis,” Podnos says.

Generally, it’s a good idea to buy enough insurance to pay off the mortgage and other debts, fund college education for the kids and replace income for enough years to provide security for the family. Industry experts recommend buying enough coverage to replace seven years of your income.

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Where to buy life insurance

You might have life insurance through work. But the free coverage provided as an employee benefit probably isn’t enough if you have a spouse or kids. Another downside: The coverage ends if you leave the employer.

You might be able to buy additional coverage through work. The application process is easy, and this type of extra coverage usually is portable, so you keep it if you change jobs.

If you’re healthy, you could find less-expensive coverage on your own — one way is to start with quotes online and buy through an agent or directly from an insurance company. And with some companies, you may not have to take a life insurance medical exam.

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