The Young Adult's Guide to Buying Life Insurance

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Team Waffle
March 7, 2023
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A Guide To Buying Life Insurance For Young Adults

Just a few years out of college and drowning in student loan debt? The last thing on your mind is probably buying life insurance. You're probably just trying to meet your basic expenses and maybe setting up your first 401(k), and it can be tough to justify any extra expenses. You might even think life insurance is only for recent parents or middle-aged people. But guess what? Young adults are in the best position to buy life insurance. The cost when you're young is usually lower than it will be later on, so you can snag a sweet deal.

What Is Life Insurance For Young Adults?

Life insurance can seem like a confusing and overwhelming topic, especially for young adults who are just starting out in the world. But it's important to remember that life insurance is a crucial financial tool that can provide financial security and peace of mind for you and your loved ones. So, don't be afraid to do your research and find the right policy for your needs and budget. Whether it's term life insurance to cover you for a specific period of time, or permanent life insurance to provide lifetime coverage and cash value, there's a policy out there that can help protect your family's financial future.

What Does Life Insurance Cover?

There are two main types of life insurance: permanent and term. Permanent life insurance, like whole life insurance, lasts your whole life as long as you keep up with your premium payments. In addition to providing your loved ones with a guaranteed payout when you pass away, whole life insurance also comes with a financial benefit you can use while you're alive called cash value. It grows in value over your lifetime and provides insurance protection now while also building cash value each year. Your cash value is protected from market fluctuations, so it'll be there when you need it. You're getting lasting financial protection and an extra financial perk all in one.

On the other hand, there's term life insurance. It only provides financial coverage for a set amount of time, ranging up to 30 years. It's initially more affordable and does provide your loved ones with financial protection. However, it doesn't have a cash value benefit and when your term is up, the coverage is up too. While it provides financial protection if you pass away before your term is over, when the coverage ends, you don't have an asset. Renewing term life insurance when you're older will probably cost more and might involve a medical exam. Many people have both term and permanent life insurance for optimal protection.

The Advantages Of Being Young

Lock In Affordable Premiums

Generally speaking, the younger and healthier you are, the lower your life insurance premiums will be. Life insurance for adults usually gets more expensive as you age, so if you get it when you're young, you might be able to lock in lower premiums. This could save you from paying higher rates as you age or develop any health issues. And if you get permanent life insurance when you're young, your cash value portion will have more time to accumulate interest or investment returns.

It Can Save You From Higher Premiums If Your Health Declines

Most life insurance policies require you to pass a health evaluation or medical exam before finalizing your eligibility and rate. If you have a pre-existing medical condition, it can affect the cost of coverage or even result in a denial. But once you're locked in with life insurance coverage, your insurance company usually can't increase your premium if you develop a health issue. And if your family has a history of chronic or genetic illness, getting coverage early before you develop the condition may be a good way to guarantee yourself a lifetime of insurance before it becomes difficult to obtain coverage or too expensive

To Have More Time Building Cash Value

If you're a young adult just starting out in life, you might be more interested in a term life insurance policy. These policies offer coverage for a specific period of time and are generally more affordable than permanent policies. And if you decide down the road that you want more coverage, you can always convert your term policy to a permanent one. Just don't wait too long to make the switch, because premiums tend to increase as you get older.

What Type Of Life Insurance Policy Is Best For Young Adults?

Trying to decide which type of life insurance is right for you can be a tough decision, but don't worry, you don't have to go it alone. You can always talk to a financial advisor or a licensed life insurance agent to help you figure out what's best for you. And if you're a young adult with some time on your side, you might want to consider a more aggressive investing strategy with your life insurance. Just make sure you're comfortable with the balance of risk and reward.

For example, if you go with a whole life policy, the cash value will just earn a little bit of interest, kind of like a savings account. But if you get a universal life policy, you can invest the cash value in stocks and mutual funds, which could potentially give you a bigger return. Just keep in mind that stocks and mutual funds are riskier because the financial markets can be volatile. If you want to take on a moderate amount of risk, you might want to look into an indexed universal life policy, where you can invest in an index like the S&P 500, which has a good track record over the long term. Anyway, these are just some options to think about - make sure you talk to an expert to figure out what's best for you.

When To Get Life Insurance?

Ready to make a wise investment in your future? Get life insurance while you're young and healthy! Not only will it provide peace of mind and financial security for your loved ones, but it can also save you money in the long run. And who doesn't love saving a buck or two? Plus, with various policy options like term and whole life insurance, you can find the perfect fit for your unique needs and budget.


Is The Death Benefit I Leave Taxable?

Don't let Uncle Sam take a bite out of your life insurance payout! While the majority of the time the death benefit of a life insurance policy is passed on to your beneficiary tax-free, there can be exceptions. To make sure your loved ones get the full amount they're entitled to, it might be a good idea to chat with a tax pro to understand any potential tax implications in your situation.

Should I Purchase Life Insurance For My Kids?

So, you're considering buying life insurance for your little one? First of all, props to you for being proactive and looking out for your family's financial security. There are a few reasons why parents might want to consider purchasing life insurance for their children.

First, it can provide a death benefit to cover funeral expenses or other costs in case of an unexpected tragedy. No one wants to think about the worst happening, but it's better to be prepared just in case.

Another reason some parents opt for child life insurance is to help make their child more insurable in the future. If your child has a pre-existing medical condition or is immunocompromised, they may have a harder time getting approved for life insurance as an adult. By purchasing a policy for them now, you can potentially lock in lower rates for the rest of their life.

Ultimately, whether or not to purchase life insurance for your child is a personal financial decision. It's important to consider your family's unique situation and needs when making this choice. And remember, a financial advisor or licensed life insurance agent can be a great resource in helping you weigh the pros and cons.

Can Life Insurance Help Pay Off Loans?

If you're worried about leaving behind a financial burden for your loved ones, life insurance can provide some much-needed peace of mind. When you take out a policy, you can choose to designate a beneficiary who will receive the death benefit if you pass away. This money can be used to pay off outstanding debts, such as mortgages, car loans, and credit card bills, helping to alleviate some of the financial stress your loved ones may face.