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Does It Make Sense To Get Life Insurance in Your 20s?

Feb 9, 2023 5 Minute Read

When you think of life insurance, you may think of older adults with financial responsibilities, dependents, and debt. However, buying life insurance in your 20s can have significant benefits.

Although older generations are more likely to purchase life insurance, the number of people getting life insurance in their 20s is growing. According to LIMRA’s Life Insurance Barometer Study, 38% of people under 25 purchased life insurance in 2020, compared to 28% in 2011. This trend indicates younger adults recognize the benefits of securing a life insurance policy as they build their careers, families, and financial future.

Who should get life insurance in their 20s?

Regardless of age, life insurance can protect those who may be affected financially in your absence. The following are some of the reasons why buying life insurance in your 20s might be worthwhile.

  • You have dependents: When you have people who depend on your income, a life insurance policy is a safety net of financial protection for them. Your policy’s death benefit could cover childcare and put food on the table at a time when your family might otherwise be struggling.
  • You have plans for a family: If you are single now but plan to have a family in the future, buying life insurance is a wise choice, especially when you’re young and can secure the best rates. An increasing term life insurance policy could be worth exploring if you plan to significantly increase your life insurance needs in the near future.
  • You have debt: If you have student loans, a mortgage, or other substantial debts that won’t go away if you pass, a life insurance policy ensures your debt burden doesn’t become your family’s.

What are the benefits of getting life insurance in your 20s?

When you’re just starting out in your career and getting your financial life in order, life insurance may not top your list of priorities. However, much like an emergency fund, life insurance can provide peace of mind as you focus on the future. There are many good reasons to buy a life insurance policy at a young age, including:

  • Policies may be more affordable: For healthy people under the age of 30, the cost of life insurance may be less than you think. In fact, according to LIMRA’s 2022 Life Insurance Barometer Study, 51% of Gen Z respondents estimated the annual cost of term life insurance for a healthy 30-year-old to be over $1000. In reality, a 20-year term policy for $250,000 for a healthy 30-year-old is closer to $170 per year and potentially less expensive for someone in their 20s.
  • You may qualify for more coverage: Since you’re generally healthier when you’re in your 20s, you may qualify for higher coverage amounts than if you waited to purchase coverage in your 40s or 50s. If you buy a permanent policy at an early age, it will also protect you from potential denial for health issues later in life.
  • There’s more opportunity to accrue cash value: Some permanent life insurance policies build cash value over the years. The earlier you buy a policy, the longer the cash value will grow, meaning you could have a larger balance if you’d need to tap into the funds down the road.
  • Loved ones receive a tax-free benefit: If you’re getting a policy to help loved ones cover debt or pay for your funeral if you pass, they’ll receive the money tax-free in most situations.

What is the best type of life insurance in your 20s?

There are typically two main types of life insurance you might consider in your 20s. The best option depends on your unique situation and budget.

Term life insurance

The most affordable form of life insurance coverage is term life insurance, which is a budget-friendly option for young adults. A term life insurance policy lasts as long as you choose, typically between 10 and 30 years. If you purchase a policy in your 20s, a 30-year term will cover you into your 50s through many of life’s largest financial decisions.

Permanent life insurance

Although more expensive, permanent life insurance lasts your entire lifetime if the premiums are paid. Aside from whole-life protection, it also builds a cash value, which can be withdrawn or borrowed against. If purchased at a young age, it is possible to get favorable coverage at a lower cost.

The most basic and popular type of permanent coverage is whole life insurance. Universal life insurance offers you more investment flexibility and options to change the premium and death benefit. But the policy’s cash value is affected by the market conditions, not guaranteed like with a whole life policy.

Who doesn’t need life insurance in their 20s?

Everyone may not need to buy life insurance in their 20s. You may be better off waiting on life insurance if:

  • You’re single with no dependents.
  • You have enough savings to take care of your final expenses.
  • You’re debt free with no financial burden.

As your lifestyle and financial situation change, it is important to reassess your need for life insurance. If you already have coverage, it’s recommended that you review your policy annually to see if you need to make any changes. If you’ve gotten married, earned a promotion at work, or added any little ones to the picture, you should adjust your coverage accordingly.

Find the right life insurance policy at any stage of life

The first step in getting life insurance is considering your needs and budget. At eFinancial, it’s easy and hassle-free to get quotes from multiple carriers who assess your coverage needs by considering your lifestyle, budget, and long-term goals. Get a quote today, or contact an agent to explore your options.

FAQs about life insurance in your 20s

Is it ever too early to get life insurance?

Depending on the insurer, you may not be eligible to get a life insurance policy as the policyholder until you’re in your early 20s. While life insurance can be purchased at any age, buying it when you’re young is less expensive and gives you more coverage options.

What is a good age to get life insurance?

Life insurance premiums usually rise as you get older. Buying life insurance in your 20s is considered ideal because you’ll often qualify for the best rates, more coverage options, and greater insurability. However, older adults can find great life insurance options even into their 80s with some insurers.

Is life insurance worth it if you’re single?

Life insurance for a single person makes sense if you have plans for a family in the future or if you have a financial burden that can pass on to others if you’re gone. For example, if your parents co-signed on student loans or a mortgage, they could be on the hook for payments if you pass away.