Published: June 2015
Q: I'm just starting out and don't have much of my own yet. Do I really need life insurance?
A: Even at a young age, life insurance is important, says Cheryl Bowker, an Allstate agent in Livonia, Michigan. Although people tend to instinctively think of it in terms of protecting "stuff," life insurance is about more than protecting possessions, she says. A life insurance policy can help protect your loved ones from unexpected expenses.
When you're young, it may seem like no one is counting on you financially. Bowker notes, however, many young adults have considerable debt in the form of college loans.
"It's common for parents to have co-signed college loans, and in some cases — for example, with private student loans — co-signers can be responsible for that debt if something happens to you," Bowker says. Life insurance benefits can help family to cover this debt if you were to pass away.
Bowker also notes that "Life insurance can replace income for your family or spouse. If you are married, you need to consider that your spouse probably has college loans, too. Would they be able to pay for your loans into addition to their own without your income?"
"Life insurance is never going to be more affordable than it is when you're young and healthy," Bowker says.
Premiums are driven by your age and health, and "getting it now means locking in those lower rates and potentially guaranteeing your future insurability." You will also already be insured if you get sick down the road, which can be very important as certain conditions may mean you cannot get life insurance or that the costs could be prohibitive.
Bowker says younger customers tend to purchase term policies, as they are typically more affordable. When choosing term life insurance, she recommends keeping future plans in mind (such as getting married, buying a home or having children) and getting a policy with a longer term.
"Look back five years and see how much your life has changed. Imagine what will change in the next five to 10 years," Bowker says.
Planning for the future now can help you avoid the need for another policy if your needs change (which could mean higher premiums due to age or health at that time). You may also want to select a policy that can be converted to a permanent policy later, Bowker says.
A permanent policy can be a good choice for several reasons. It stays with you for life (assuming you stay up to date on premiums) and can be a way to start saving money, as many permanent policies can build cash value. This money is yours and, once accumulated, can be used as a source of emergency funding1. According to Bowker, "A permanent insurance policy can be a very stable piece of your financial plan."
Planning early can be smart in the long run. Not only are you helping to protect your loved ones — parents, siblings or a spouse — from potentially burdensome expenses, but you may benefit from lower rates and starting a financial plan at a young age. "You take life insurance out for yourself and for your loved ones. You take it out to do the responsible thing for later in life," says Bowker.
To learn more about why life insurance might be a good idea for you, contact an Allstate agent today.