Should you get life insurance in your 20s? | Costs vs. benefits

Should I get life insurance in my 20s?

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Actually, you’re at the perfect age to think about life insurance. Here’s why.

Your 20s may be the perfect age to learn about life insurance. There are advantages to buying it at a young age, one of them being cost. You certainly don’t have to buy it if you’re not ready, but it never hurts to arm yourself with more options.

Compare life insurance providers for people in their 20s

Name Product Issue Ages Minimum Coverage Maximum Coverage Name
18 - 85 years old
$50,000
$10,000,000
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18 - 80 years old
$50,000
$25,000,000
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Is life insurance in my 20s worth it?

In general, if you have people depending on your financial presence – parents, children or a spouse for example, it is a good way to protect them financially should anything happen to you. While the odds of passing away soon in your 20s aren’t high, it’s still a possibility and might be something you want to cover.

Odds of a 20-something-year-old passing away

AgeWithin the next yearWithin the next 5 yearsWithin the next 10 yearsWithin the next 20 yearsWithin the next 30 years
200.07%0.41%0.90%2.20%4.67%
210.08%0.44%0.94%2.30%4.99%
220.08%0.45%0.98%2.41%5.34%
230.09%0.47%1.01%2.52%5.73%
240.09%0.48%1.04%2.64%6.15%
250.09%0.49%1.07%2.78%6.60%
260.10%0.51%1.11%2.94%7.10%
270.10%0.52%1.15%3.12%7.64%
280.10%0.54%1.20%3.32%8.23%
290.11%0.56%1.25%3.55%8.86%

*Based on the combined male and female percentages of our odds of dying data.

While the odds are relatively low, the rates you’ll receive now are a lot lower than the ones you would receive in your 30s or 40s.

How much will life insurance cost?

You might be surprised by how inexpensive life insurance can be. If you’re in good health, it’s possible to get a 20-year term-life policy with a $250,000 death benefit for around $15 a month.

Average monthly premiums of a $250,000 20-year term-life policy for individuals in excellent health

AgeAverage monthly premiums for a maleAverage monthly premiums for a female
20$14.82$12.69
21$14.77$12.69
22$14.69$12.69
23$14.64$12.69
24$14.58$12.68
25$14.55$12.73
26$14.56$12.78
27$14.65$12.85
28$14.69$12.95
29$14.74$13.00

* Based on the rates of 12 providers provided to us by Quotacy

What type of life insurance should I buy?

Many financial experts say term life insurance is a fine pick.

For one, it’s much less expensive than whole life insurance. While term life premiums can be an easy cost to add to your monthly expenses, whole life premiums may strain the budget.

A 30-year term life policy can cover you well into your working years, when you might need a death benefit most. By then, you may have fewer financial obligations and hence have no need for an expensive life insurance policy. At that time, you can renew your policy or take out another life insurance policy.

What about whole life insurance?

Term life insurance is often a good choice, but that doesn’t mean you shouldn’t consider whole life insurance. The latter can be a good decision if you want to be covered no matter what, or if you’re looking to supplement your retirement accounts.

You might also choose whole life insurance if you want someone to grow your money for you. If this is the reason, consider robo-advisors as well — wealth management companies that use computer algorithms to invest your money.

Why it’s not too early to think about life insurance in your 20s

Even if you choose not to buy life insurance at your age, it’s still smart to consider it. Here are a few good reasons to start thinking about life insurance while you’re young.

1. It’s probably cheaper.

Perhaps the best reason to consider life insurance now is because it tends to be a lot cheaper. As you age you’re more likely to develop health conditions, just when life insurance becomes more expensive.

While you’re in your 20s, you can lock in a low term-life premium for decades. And if you buy whole life insurance, you can pay the same low premium for the rest of your years — even if your health deteriorates.

Why does life insurance get more expensive as you get older?

Like all businesses, life insurance companies want to make a profit. They can’t escape basic math — they have to pull in more money than they lose.

The math is simple: Life insurance companies make money when they collect premiums. They lose money on death benefits — funds they pay out when a policyholder dies.

Older individuals are more likely to pass away, which means insurers need to charge higher premiums to balance the math. The same goes for other segments of the population who have a higher mortality risk: Smokers, individuals with serious diseases, reckless drivers and so on.
Learn everything you need to know about life insurance

2. It allows you to protect those who you support financially.

If there are people who rely on your income — a spouse or children, for example — a life insurance policy would pay a death benefit to them should the unthinkable happen to you.

And if you have debt such as student loans or a mortgage, a life insurance policy can prevent your family from taking on a big financial burden when you die.

3. You can create an investment vehicle for retirement.

If you buy permanent life insurance at an early age, your premiums could grow into a sizable cash value as the years go by.

Cash value explained

There are two types of life insurance: term and permanent.

Permanent life insurance, such as whole life insurance, comes with cash value. This is an investment account that comes with your insurance. As you pay your premium, a portion of it goes into that account.

Over time, your cash value will grow tax deferred — that is, it won’t be taxed until you withdraw it. You have several options with your cash value. You could, for example, collect it and end your life insurance policy early.

What’s the difference between term and whole life insurance?

Cash value can grow to a substantial amount if you give it time to accumulate. That’s why it could be smart to buy a cash-value policy when you’re young.

As with any financial matter, do your own research. Some financial experts say permanent life insurance isn’t worth it because you can grow your money faster through other investments.

4. You can donate to charity.

You can leverage your life insurance policy to support your favorite charity. If you buy a policy with a high death benefit, you may be able to add a charitable giving rider. When your provider pays out the death benefit, it’ll also donate 1% to 2% of the payout to a charity of your choice.

If you’d like, you can donate your policy to a charity. When you do, it’ll own the policy and receive the death benefit when you die.

Pros and cons of buying life insurance in your 20s

Pros

  • Lock in your premium before you get older and potentially develop health conditions.
  • A term life policy can be relatively inexpensive.
  • If you purchase a whole life policy, you give your cash value more time to grow.

Cons

  • An insurance premium — especially one for whole life insurance — can strain your budget.
  • You may not have many people depending on your income, so life insurance can feel like an extraneous expense.
  • Instead of paying an insurance premium, you could invest your money and potentially get a higher return.

Bottom line

If you’re a 20-something, it’s not too early to think about life insurance. In fact, it’s a perfect time to start your research.

You may be able to lock in a great premium at your age. If you do, you can pay the same rate for decades, or even for life. You’ll be covered by a death benefit well into your working years and perhaps after you’ve retired.

Want to learn more? Check out our comprehensive guide to life insurance, where you can research your options and compare providers.

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