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Should I get life insurance in my 20s?

This is the ideal time to take out life insurance. Here’s why.

Taking out life insurance in your 20s could save you significant amounts of money in the long run, so it’s certainly worth considering. We look at the types of policies you might look at and offer you reasons for and against taking out a life insurance policy at such a young age.

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Is life insurance in my 20s worth it?

You only need life insurance if you have people, such as your parents, children or a partner, who depend on you as a breadwinner. While the odds of you dying soon aren’t particularly high, there’s still a chance of it happening.

What types of life insurance are there?

Whole life insurance

One of the two main types of life insurance is whole life insurance. As the name suggests, you pay premiums for the whole of your life.

As there’s a guaranteed payout at the end, the insurer will charge you more for a whole life policy than it would for the other form of cover – term life insurance.

Term life insurance

Typically, term life insurance policies are the more affordable type of deal. This boils down to the fact that the insurer may never have to pay your loved ones a single penny.

Why? Well, you take out this policy for an agreed “term” from anywhere between 5 and 30 years. If you die during this time, then the policy will pay out to your beneficiaries. But if you survive beyond the policy’s end date, then the insurer doesn’t pay.

What type of life insurance should I buy?

When you’re young, term life insurance is generally much more affordable. When compared with whole life insurance, term life policies are far less of a strain on your wallet.

Taking out a 30-year term life deal in your 20s can protect you for much of your working life. By the time you’re in your 50s, you may not have as many financial obligations, and by the time you’re nearly 60, you could have paid off any debts like a mortgage. Also, your children could have grown up and left home, so you won’t need an expensive life insurance policy.

You could then renew your policy in your 50s or take out another policy.

What about whole life insurance?

While term life insurance is generally a good bet, you should still consider whole life insurance. This more comprehensive form of cover will cover you no matter what.

You might decide to get a whole life deal if you want to try growing your money. Certain policies will invest your premium payments and tie the performance of the investment fund to your eventual payout.

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

Even if you decide you’re still too young for life insurance, it’s worth thinking about now. You might even want to revisit the idea of getting cover in a couple of years or after you’ve had a kid. Here are a few reasons why it makes sense to buy life insurance while you’re young:

1. It’s probably cheaper

The most obvious reason for taking out life insurance now is because it should be much cheaper. The chances of you developing a health condition as you get older will only increase and so will insurance costs.

Buying a term life policy or whole life deal in your 20s can ensure you get cheap premiums for decades to come – potentially for the rest of your life.

2. It allows you to protect those you support financially

If you have people who rely on you as the breadwinner, a life insurance policy will offer them a financial safety net should the worst happen to you.

This would be particularly crucial if you have any credit card debts or a mortgage to pay off. By getting a life insurance policy, you can save them from having to take on the financial burden.

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 sizeable cash value as the years go by.

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

It goes without saying that life insurance companies want to make a profit. And to do this, they have to bring in more money than they lose.

So their ultimate goal is to collect more in premiums from their customers than they pay out in death benefits – funds they pay out when a policyholder dies.

Life insurance companies see older individuals as a higher risk since they are statistically more likely to die, which in turn means life insurance companies charge people more the older they get.

Pros and cons of buying life insurance in your 20s

Pros

  • Lock in your insurance costs now before you age and potentially develop health conditions
  • A term life policy can be relatively affordable
  • You can use a whole life policy to invest money and earn a higher payout

Cons

  • Insurance premiums could eat into your budget, especially a whole life deal
  • If you don’t have any financial dependents, there’s little point getting life insurance
  • Rather than pay insurance premiums, you could potentially make more by investing your money elsewhere

Bottom line

If you’re in your 20s, it’s still worth having a look at life insurance – particularly if you have anyone who relies on your income.

You might also want to lock in low premiums at a young age. You could potentially make big savings in the coming years. Taking out a deal now will certainly be cheaper than when you are in your 30s or 40s.

Still undecided? Take a look at our comprehensive life insurance guide. It can take you through all of the ins and outs of life insurance as well as explain which is better for your exact situation.

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