Contrary to popular belief, the best time to start looking at life insurance policies is not when you’re approaching middle age and beyond— it’s in your 20s. When you’re 25, you can’t afford to NOT purchase a life insurance policy. Here are five of the main reasons why:
1. Life starts at 25
Yes, the saying is true. At 25, your parents can no longer claim you as a dependent, and you are essentially kicked off of their insurance (health, life, etc.) Your mid-20s is also around when you finish your education and make the transition into a professional career. As you do so, you will start putting money into a 401K and saving for retirement (however long off that may be). Many also start families around this time, and many more at least start thinking about what they want in terms of a future family. Financially and socially you are worth more now, and life insurance will protect this.
2. You are not invincible
Nobody likes to hear this, but at the same time, it is something every young person needs to hear. Once you are 25, doctors start running more tests during your regular checkups. While you are unlikely to pass anytime soon, things do happen. The average funeral and burial costs between $6,000 and $10,000, and this financial burden often adds further strain to your already grieving family and/or friends.
3. The rates are really cheap
Even if you do have some health problems at this point, in all likeliness you will still not pay as much as someone who is older and has the same conditions. That said, the time to get term life insurance really is now. Insurance rates do start going up at this time, so it is best to lock in a good rate while you can. Let’s take a look at some examples:
Maria is healthy 25-year-old woman who does not use any tobacco products. As such, she is eligible for some of the best rates insurance providers have to offer. For a $100,000 policy for a term of 20 years, these are what she is likely to see from some of the top companies:
Banner Life: $8.75 per month
Protective Life: $8.66 per month
SBLI: $8.96 per month
Transamerica: $9.54 per month
Assurity: $9.77 per month
Genworth: $10.24 per month
ING: $10.50 per month
American General: $10.98
Rates fluctuate depending on factors like gender, state, health and nicotine use, but overall they will still be cheaper if you purchase a policy at age 25 rather than waiting 10 years or more. Had Maria been a 45-year-old nonsmoker seeking the same insurance coverage, the rates offered to her would likely start no lower than $14.00 or $15.00 per month.
4. You are more eligible now
Your eligibility for term life insurance goes hand in hand with the lower rates you will pay. Younger people often have to jump through fewer hoops to get a good term life insurance policy, and in some cases you may not even need a medical exam as part of your application (you will just need to answer some questions about you health). Your body also rebounds from illnesses and surgeries faster now than if you were older, and insurance providers know that. They simply do not scrutinize younger applicants as much as they do older ones.
5. It protects your family
This is the bottom line and the main reason for buying term life insurance. You may not even have started a family yet, but it is likely that you will soon. If you’re like many 25 year olds and have outstanding debts like student loans, the payout from your term life insurance policy will ensure that your loved ones don’t have to foot the bill (another bonus in addition to funeral costs).
Term life insurance also protects your family for the future and ensures that they will be taken care of should anything happen to you. Since term life insurance policies typically range between 10 and 30-year terms, you are only buying coverage for the years in which you are actually likely to have dependents (though keep in mind that you can usually extend policies and convert them later on if you find you need more years of coverage). On the other hand, if you purchase a term life insurance policy later in life, you could end up paying more due to age and your health not being as good as it is today. So, the time to get a policy is now.