The millennial generation is defined as those born between the years 1982 and the early 2000’s. For the scope of this article we will classify those who are currently between the ages of 18 and 35 as millennials. When it comes to life insurance, studies have shown that roughly 65 percent of millennials do not own any. The most common reasons given by millennials for not having life insurance are:
- They are healthy and do not need it.
- They think they cannot afford it.
The first reason can quickly be shot down by the fact that it is cheaper to buy life insurance when you are young and healthy than it is when you are older and possibly less healthy. Also, let’s not forget that family history plays a part in determining the cost of life insurance. It is better to get life insurance when your parents are alive and well.
The second reason stems from the lack of knowledge on the cost of life insurance. For someone between the ages of 18-35, a 10-year term policy with $250,000 of coverage can be purchased for the same price as a Netflix subscription ($14 per month).
Why do millennials need life insurance?
The number one reason people buy life insurance is to replace the income that their dependents rely on in case they die prematurely. For millennials, many of them may not be married or have children yet. In this case, it would be their parents bearing the burden of their premature passing. When buying life insurance, it is important to choose the policy that meets your needs. It doesn’t make sense to buy an expensive term policy with a $500,000 death benefit if all you want to do is cover the cost of your funeral expenses.
Millennials should take into consideration their current financial situation. Are you married, single, a parent or have large amounts of debt? How much will your family need if you were to suddenly pass away? To accurately calculate your life insurance needs, use this life insurance needs calculator.
What type of life insurance is best for millennials?
The two main types of life insurance are term life insurance and permanent life insurance. Term life provides coverage for a set amount of time, usually between 5 and 30 years. Permanent life insurance offers coverage that does not expire as long as premiums are paid. Permanent life insurance policies such as whole life insurance allow the owner to accumulate cash value that they can later borrow against. The best type of life insurance will depend on your financial situation and whether or not you have any dependents. Note: Check prices on life insruance policies that do not require a health exam.
Whole life may seem like a great option given that 66 percent of consumers cite having money for a comfortable retirement as the most common financial concern. However, financial planners often agree that term life insurance is the best form of insurance for most people. This is due to the fact that it is cheaper than whole life, and it makes more sense to maximize contributions to their employer’s 401k and their own IRA accounts.
Most employers also offer a term life insurance plan as part of their benefits package. While the death benefit may be limited to one year’s salary, it can be a good option for those that do not have any coverage and are concerned with price. Just remember that you will have a coverage gap should you quit or change jobs.
With 65 percent of millennials not having any life insurance coverage, I hope this information has cleared up the confusion as to why it is important to have life insurance. Remember that life insurance coverage is more affordable than most think. The 2016 LIMRA and LIFE Insurance Barometer study found that consumers under the age of 30 estimated that life insurance would cost them $500 per year, while the actual cost was $160 per year. Buying life insurance while you are young and healthy can save you a lot of money in the long term, and so can buying the right amount and type for your situation in life.
Image Attribution: By Jami430 [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons
The Different Types of Life Insurance for Millennials by Jonathan Holloway