Life insurance for young adults: Do you need coverage in your 20s?

Why bother buying life insurance in your 20s when you're young and healthy? Well, there are actually number of reasons why it makes good financial sense.

Young adults are perhaps the least likely group to buy life insurance. Many don’t have spouses or children depending on their income. They have loads of other spending priorities, and death is the furthest thing from their minds.

Yet there are several reasons why young adults should have life insurance. And even if there isn’t an immediate need for life insurance, there’s one key reason why young adults should get covered anyway: It will never be easier or more affordable to buy.

Here are a few things to know about life insurance for young adults.

You can find coverage that fits your budget

Young adults typically don’t have much room in their budget for something they likely won’t use. The good thing about life insurance is that it’s flexible. You should be able to find coverage that fits your budget.

One advantage is that your age is one of the main determining factors of cost. The older you are, the more you will pay. For example, one source showed that the average term life insurance rate by age per month is just less than $16 for people in their 20s. It increases slightly to just over $16 for those in their 30s. People in their 40s pay an average of $22 while those in their 50s pay just under $48.

You have options that enable you to find affordable coverage

There are a number of ways for you to spend less and still obtain some amount of life insurance coverage. One way is to shop around and compare policies to find the best deal.

Term life insurance is an example of a product in which you don’t sacrifice quality by spending less. Term life offers the same benefit whether it costs you $25 a month or $50. There are few differences in features and provisions between different term life policies. Therefore, you can largely base your decision on which policy to buy on who can offer the lowest-cost coverage.

You can also adjust the length of term on your policy. When you buy term life insurance, your premium payment buys coverage to insure your life for a specified term. The most common terms are 10, 20, and 30 years. Some insurers offer terms in five-year increments.

The longer the term, the more you will pay in premium. That’s because the risk of death increases the longer you are covered.

If you can’t find an affordable 30-year policy, then look for a cheaper 10-year term. You can always upgrade in a few years when you have more money.

Another option is to buy a policy with a lower death benefit. You may have wanted $500,000 of coverage, but $250,000 is more affordable and it’s better than no coverage at all.

You can buy coverage today that can increase tomorrow

Chances are, the life insurance policy you buy today will not be adequate to meet your needs tomorrow.

One way to increase your death benefit amount in later years is to buy a guaranteed purchase option (GPO) rider, sometimes referred to as a guaranteed insurability (GI) rider.

This rider enables you to increase the amount of your coverage without having to go through the underwriting process. There may be limits on how you use this option, such as the amount of death benefit you can add and when you can increase coverage.

Do I need life insurance if I have no dependents?

While most people buy life insurance to protect their families, there are other reasons that young adults should consider having coverage.

Even if you die without dependents, there will likely be expenses related to your funeral and settling your estate. Any debts you have, including private student loans, will need to be repaid upon your death, especially if somebody has co-signed for a loan. A term life insurance policy can make sure those costs can be covered without burdening parents or other relatives.

Speaking of parents, many young professionals plan to use some of their wealth to care for their parents once they reach a certain age. If you’re no longer able to provide that support due to an untimely death, will your parents have the resources to pay for long-term care or other needs?

Some people also neglect the need for life insurance because they have a spouse with a successful career who they believe can live comfortably on their own. But keep in mind that a widowed spouse may need significant time off work to grieve.

While you may not have an immediate need based on your current income and dependent status, chances are you will have a higher income, more assets, a mortgage, and people depending on your income in five or 10 years down the road. Buying coverage now means you don’t have to worry about future health concerns making it more difficult to get life insurance.

You shouldn’t rely solely on a group coverage

If you work for a company or belong to a professional association, you may have access to group life insurance coverage.

A group life insurance plan typically provides guaranteed coverage without underwriting to all members of a group or all employees of a company.

Group life coverage is typically cheaper than an individual policy. It’s also easier to obtain because it does not require underwriting.

Participating in a group life insurance plan is a good way to supplement your coverage at a reasonable cost. But you should also own an individual policy to ensure that you have adequate coverage.

That’s because it’s contingent on your employment or association membership, and can often be canceled at any time. You can keep your individual policy as long as you pay the premiums.

Also, your death benefit is typically limited by the group plan sponsor. Group plans are not meant to fulfill all of your insurance needs.

Should you consider whole life insurance?

Most of the above information is related to term life insurance. Another option for young adults to consider is whole life insurance.

Whole life insurance is designed to provide coverage for the life of the insured. As long as the policy owner pays the required premium, the insured will always have life insurance coverage. Unlike term, there is no expiration on whole life insurance.

A whole life policy’s premium and death benefit typically remain the same for the life of the insurance contract.

Besides the permanent coverage, whole life insurance also builds cash value that the policy owner can access via a loan or withdrawal.

The main disadvantage of whole life insurance is that it is considerably more expensive than a similar term policy. In order to provide a guaranteed lifetime death benefit, the price of coverage is substantially higher than term life insurance, which has no such guarantee.

Another disadvantage of whole life insurance is that you may not need life insurance coverage for your entire life, yet you’ll be paying the higher premium anyway. This is especially true as a young adult. If you bought a whole life policy today, you could be paying the premium on it for 50 years or more.


Jack Wolstenholm is the head of content at Breeze.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.