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Life Insurance Needs in Your 20s and 30s

April 15, 2015
Insurance, Life Insurance
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Whether you’re chasing kids or the wildest after-bar party, if you’re in your 20s or 30s, you may not see yourself as someone who needs life insurance. But there are reasons to consider it.

You can get a great deal on insurance if you buy while you’re young. And getting married or having kids — which many people do during this time — are two of  the biggest reasons to take out a life insurance policy.

Don’t brush it off until you consider the following:

The early bird gets the deal

The older you get, the more expensive life insurance becomes. This is due to several factors but mostly because you’re more likely to develop health problems as you age. Your remaining life expectancy also goes down, which means your policy is that much more likely to pay out. Taking out a policy in your 20s or 30s will land you a low rate for years to come.

For example, term life insurance quotes for a 20-year, $500,000 policy are between $244 and $655 a year if you buy it at age 30 (and don’t smoke), versus a range of $603 to $1,555 a year if you wait until you’re 45, according to NerdWallet research.

Buying whole life insurance at a younger age can also help you accumulate a lot of cash value. You’ll have more time to put money into the policy, and a longer period to accumulate interest. Whole life insurance, in particular, can cost a pretty penny the longer you wait to buy, so locking in a good deal now can save you a lot of money in the future. You also have access to this money in the form of a policy loan should you want to pay off student loan debt, cover health expenses or buy a home.

Whole life is not for everyone, but if you have money to spare in your late 20s or 30s, it might be something to consider.

Student loan debt

Speaking of student loan debt, this is another good reason to consider life insurance in your 20s and 30s. The average student loan debt is approaching $30,000, according to the nonprofit Institute for College Access & Success. More college students are turning to private loans for education expenses — and parents are co-signing these loans.

This could put a big financial burden on your parents should you die, since they would be fully responsible for a co-signed loan. Life insurance can provide a way to pay off such loans and keep your parents from going under.

Getting married

Once you get married, you have someone depending at least in part on your income to pay the bills. Maybe you’re covering all the costs as your husband or wife finishes school. Or you’re helping pay off your spouse’s student loan debt. Taking out a life insurance policy and designating your spouse as your beneficiary will ensure he or she is taken care of in the event of a tragedy.

How much life insurance do you need? That depends on factors including your income, your assets, whether you’re covered by a life insurance policy at work, whether you have kids (and how many), and your debts, particularly your mortgage. At the very least, your spouse will need enough money to cover funeral costs and any taxes or other expenses required to wind up your estate should you die. The Insurance Information Institute suggests planning for $15,000 in such “final costs.”

Having children

Kids are expensive. There’s no way around it. If you died, your spouse or partner would have to shoulder the costs of child care, clothing, food, schooling and a lot more. If you’re a single parent, or if both parents were to die, those costs would fall on a guardian.

Life insurance helps ensure your family has enough money to keep the home and have all the opportunities they would if you were still there.

[Life insurance quotes are available through NerdWallet’s Life Insurance Comparison Tool.]

But don’t name your minor children as beneficiaries, as the insurance company won’t pay out directly to them. Instead, set up a trust or designate a custodian to manage the funds.


Image via iStock.