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Is Buying Life Insurance in Your 20s a Good Idea? Weigh the Options

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Feb. 9 2022, Published 1:48 p.m. ET

Life insurance is something just about everyone should have at some point in their life, but it might be tough to decide the best time to buy it. Should you buy life insurance in your 20s or wait until you’re older? There are a few compelling reasons for buying life insurance at a young age, but you should consider various options.

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The general purpose of a life insurance policy is to provide financial support to loved ones after the policyholder dies. The beneficiaries receive a death benefit to help cover the loss of the deceased person’s income, pay off a mortgage, raise children, or cover any other financial obligations.

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In your 20s, calculate how much a life insurance policy would cost. It's likely much less than if you waited until your 40s or 50s.

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Why is it a good idea to buy life insurance in your 20s?

Life insurance, when purchased at a young age, can benefit you significantly over your lifetime. According to Investopedia, some of the key benefits include:

  • You can get lower premiums when you’re younger.
  • You’re usually in better health when you’re younger, which reduces premiums and ensures that you can get coverage.
  • A death benefit would help your family.

As Fidelity Life explains, buying life insurance in your 20s virtually guarantees the lowest possible rates you’ll get in adulthood. The cost of a policy is minimal. If you plan on having children or dependents eventually, a 20-year term policy can ensure that you’re covered when you need it.

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Second, life insurance companies prefer to cover healthy individuals. The younger you are, the less likely you are to have medical conditions that might keep you from getting coverage later on. Lock in life insurance coverage in your 20s so that if in your 30s or 40s you learn something negative about your health, you won’t be out of luck.

Third, if you change jobs, you’ll lose any employer-sponsored insurance coverage. So, buying your own policy now ensures protection no matter how your career changes.

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If you have debts that won’t go away after your death, buying life insurance right away is wise. While student loans are usually discharged after death, loved ones might still be left with a tax bill. Mortgages will remain for loved ones to pay or deal with as well as final expenses, so even a modest death benefit in your 20s is useful.

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Burial or other final expenses are covered by life insurance death benefits.

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Should you buy term or whole life insurance?

In your 20s, term life insurance is usually your best bet. Even though it isn't expensive and you can lock in low premiums for many years, you get coverage for unexpected events. Whole life insurance, which offers a cash value and death benefits, can be worth it in a few cases, but it's usually only for people who have maxed out retirement plans like 401(k)s and IRAs.

When doesn’t it make sense to get life insurance in your 20s?

In a few circumstances, it’s fine to hold off on life insurance. If you have no dependents (people who rely on you financially) and you don’t have any debts that will last beyond death, you might wait on life insurance. If you’re living paycheck to paycheck, that’s another reason to delay coverage, but try not to wait forever.

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