Life insurance can provide peace of mind to policyholders, designating a sum of money to beneficiaries when the insured dies in exchange for premiums paid by the policyholder. The cost of insurance is impacted by many factors, including your age, health, and other considerations. But when exactly should you get a life insurance policy? Should you get life insurance in your 20s?
While you're in your 20s, getting a life insurance might not be one of your priorities, but it's the right time to ask yourself if it makes sense. After all, it serves an important purpose and can help your loved ones.
Should you take a life insurance policy in your 20s?
Whether you should take out a life insurance policy in your 20s depends on your circumstances, including how ready you are for the unexpected and who else depends or will depend on your income and you. If, for example, you have children or partners you provide for or you have co-signed debt such as private student loans or car loans, it might be a good idea to take out insurance as soon as possible. It's one of the best ways to give your family financial stability.
Premiums are often lower
Another upside of taking a policy early on in life is that it's much cheaper when you're young and healthy. On the other hand, in advanced age, people are prone to more health issues. Insurance companies assess your risk to determine the premiums.
Therefore, everything else remaining the same, the premiums increase with age. According to Life Insurance Concepts director Ted Bernstein, the premium amount increases by 8 to 10 percent on average for every year of age. Additionally, buying a policy at an early age helps you reap the benefits of compounding, which makes financial sense, too.
Moreover, in unfortunate events, you'll be assured that you're not leaving your debt behind for someone else to take care of. Also, you can have a policy in place to cover other financial obligations (like a mortgage or raising a family) that evolve as you age.
Life insurance isn’t just about death benefits
Moreover, the life insurance policy doesn’t need to be just about the death benefits. As long as you have selected your policy carefully, it could help you meet your financial and retirement goals as well. Some policies provide support for certain medical problems, such as cancer or paralysis.
A lot of policies, such as permanent life insurance policies, accumulate cash value that also serve as a tax advantage. In some cases, the cash value of a policy might accumulate money at a faster rate than other investments with less risk, which would be a win-win situation.