Understanding Life: The millennial’s guide to life insurance
Here’s a quick pop quiz for all you millennials out there: How likely are you to change jobs in the next year? When are you most likely to become a parent? And most importantly, how can you best protect the life you’re working so hard to build each day?
For the 83.1 million millennials born in the U.S. between 1982 and 2000, this whole adulting thing is getting real. Millennials make up the biggest percentage of the U.S. workforce, and 1 million millennial women became new moms last year. But when it comes to protecting everything you’ve worked to achieve, a lot of your fellow millennials are still in the dark about one of the best ways to do it: life insurance. One study found that millennials are skipping coverage to save for retirement or even for vacations, and Life Happens found that two-thirds of millennials don’t understand how life insurance works.
Life insurance is a simple, affordable, and essential part of a successful financial plan – and something most of us need to have. Here’s why buying life insurance matters for millennials and how you can get the protection you need fast.
Why do millennials need life insurance?
Life insurance is essentially a contract between you and a life insurance company. If you die while the policy is active, your insurance company will provide a cash payout. When you go to buy a policy, you’ll typically choose between term life insurance, which covers you for a set period of time, and permanent life insurance, which will cover you for your entire life.
A life insurance policy can provide tremendous help financially to your family after you’re gone. They can use your payout for anything, like covering credit card debt, paying off student loans, replacing income, and even covering medical expenses. While many people put off buying life insurance until they’re older or married, there are great reasons to get covered now.
Your Career Won’t Cover You
The job you’re at now may offer a group life policy as part of your benefits package. But that policy typically isn’t something you can take with you when you switch jobs, and there’s a good chance you will switch one day. One LinkedIn study found that millennials change jobs four times on average in the decade after college, twice as often as Generation Xers. Job loyalty pales in comparison to job quality for your generation, and there’s nothing wrong with that. You have to look out for yourself and your family, which is exactly why securing your own life insurance policy is important.
Aside from the company owning your policy, the coverage offered in these group plans is often way below the five to seven times your income that financial experts recommend. Getting started with a policy like term life can be crucial for planning your future, because your own life insurance policy is something you can carry safely with you through all the job changes still to come.
It’s well-documented that the millennial generation is not one for rushing into marriages and baby carriages. Still, the time does come. On average, millennial women tie the knot at 27; men at 29. The first kid usually shows up about a year later. For those born in 1991 – the middle of the generational spread – this is a big year, statistically speaking, because they’ll be turning 28. You may be young and healthy now, but don’t let that lure you into a false sense of confidence. An illness or accident can happen at any time, and your life insurance policy is there to protect your spouse and kids from financial hardship if the worst happens. A life insurance policy isn’t for you – it’s for them.
Youth (and Low prices) are Fleeting
There’s no such thing as being too young for life insurance. Despite the fact that 42 percent of millennials think they wouldn’t qualify for coverage, younger is actually better. Life insurance rates increase between 8 and 10 percent each year. Buying now is also probably way cheaper than you think it is: 44 percent of millennials overestimate the cost of life insurance by five times the actual amount.
The younger you are, the more affordable your premiums will be, and you’re guaranteed to have coverage through the years, no matter what happens to your health. Even if you have a preexisting condition now, there are still coverage options available for you. Locking in a policy sooner than later is a smart move, even if you’re single, because you can always adjust the policy as your family grows.
Finding the policy that fits
Even the briefest search for life insurance online can bear overwhelming results. There’s a lot out there, and not all life insurance carriers were created equal. A little guidance in this area goes a long way– and you don’t even need a financial advisor to get that guidance.
Starting online is great, but buying from a professional life insurance agent is how more than half of your generation prefers doing this kind of business. Talking to an agent can help you understand the different types of coverage and what makes sense for you, both today and tomorrow.
Buying life insurance is not a difficult thing to do, but it is personal. Need help getting started? Our agents are just a call or click away.
At eFinancial, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed and updated regularly to ensure the information is as relevant as possible.