Should I Get Life Insurance in My 20s?

Are you in your 20s and wondering if life insurance is something you should consider? You’re not alone. Many young adults think life insurance is only for older people or those with families. But the truth is, getting life insurance early can be a smart financial move that offers benefits now and in the future. 

In this article, we’ll explore why you might want to think about life insurance in your 20s, what types of policies are available, how much coverage you might need, and where to get it. By the end, you’ll have a clearer picture of whether life insurance is right for you at this stage of your life.

Why Consider Life Insurance in Your 20s?

Life insurance might seem like something you don’t need right now, especially if you’re young and healthy. But there are several good reasons to think about it early:

• Protect Your Loved Ones: If you have dependents—like a spouse, children, or even parents who rely on your income—life insurance can provide financial support for them if something happens to you. 

It ensures they won’t struggle to pay bills, cover daily expenses, or maintain their standard of living. For example, if you’re married and your spouse depends on your income to pay rent or a mortgage, life insurance can help them stay afloat.

• Lock in Lower Premiums: One of the biggest advantages of getting life insurance in your 20s is that premiums are much lower when you’re young and healthy. Insurance companies charge less because younger people are statistically less likely to die. 

By starting early, you can secure these lower rates for years to come, saving you money over time. For instance, a healthy 25-year-old might pay around $15-$18 per month for a $250,000 term life policy, compared to much higher rates in their 30s or 40s.

• Cover Debts and Financial Obligations: If you have student loans, a mortgage, or other significant debts, life insurance can help pay them off if you pass away. This prevents your loved ones from being left with the burden of your debts. For example, if you have $50,000 in student loans, a life insurance policy could cover that amount, so your family doesn’t have to take on that debt.
  
• Peace of Mind: Knowing that your family is financially protected can give you peace of mind. It’s a way to plan for the unexpected and ensure that your loved ones are taken care of, no matter what happens. This can be especially comforting if you’re starting a family or taking on big financial responsibilities like buying a home.
  
• Long-Term Planning: Life insurance isn’t just about today—it’s about your future. Starting early allows you to build cash value with certain types of policies, which can be used for retirement, education, or other long-term goals. Plus, getting coverage now means you’re protected as your life changes, like getting married or having kids.
  

Recent trends show that more young adults are recognizing the value of life insurance. According to industry reports, there was a 14.1% increase in life insurance applications for people under 30 in 2022. This suggests that younger generations are starting to see the benefits of planning ahead.

Types of Life Insurance for Young Adults

When it comes to life insurance, there are two main types to consider: term life insurance and permanent life insurance. Each has its own advantages, and the best choice depends on your needs and budget.

• Term Life Insurance:
  
  • What It Is: Term life insurance covers you for a specific period, usually 10, 20, or 30 years. If you die during that time, your beneficiaries receive the death benefit. If you outlive the term, the policy expires, and you stop paying premiums.
  • Why It’s Good for Young Adults: Term life is often the most affordable option, making it ideal for young people who want coverage while they have dependents or large debts. For example, a 20-year term policy can cover you through your 30s and 40s, when you might have young kids or a mortgage. It’s also a great way to “test the waters” of life insurance without committing to a lifelong policy.
  • Key Feature: Many term policies allow you to convert them to permanent life insurance later without a new medical exam, which can be helpful if your health changes over time.
• Permanent Life Insurance:
  
  • What It Is: Permanent life insurance, such as whole life or universal life, provides coverage for your entire life as long as you pay the premiums. These policies also build cash value over time, which you can borrow against or withdraw.
  • Why It’s Good for Young Adults: If you want lifelong protection or are looking for a way to grow wealth over time, permanent life insurance might be worth considering. The cash value can act as a savings account, offering tax-free growth that you can use for things like buying a home or supplementing retirement income.
  • Downside: It’s more expensive than term life, so it might not be the best choice if you’re on a tight budget. For example, premiums for permanent life can be hundreds of dollars per month, compared to $15-$20 for term life.
• Other Options: There are variations like universal life, which offers more flexibility in premiums and coverage, or decreasing term insurance, where the death benefit shrinks over time (useful for covering debts like a mortgage). For most young adults, term life is the go-to choice because it’s affordable and meets immediate needs. However, if you’re looking for something that lasts a lifetime or want the investment component, permanent life insurance could be a good fit.
  

How Much Coverage Do You Need?

Figuring out how much life insurance you need can feel overwhelming, but there are some general guidelines to help:

• A Common Rule of Thumb: Many experts recommend having coverage equal to 10-30 times your annual income. For example, if you earn $40,000 a year, you might need $400,000 to $1.2 million in coverage. This ensures your family can maintain their lifestyle and cover expenses like mortgages, education, and daily living costs.
• Consider Your Dependents: If you have a spouse or children, you’ll likely need more coverage to ensure they’re financially secure. For instance, if you have a young child, you might want enough to cover their living expenses until they’re an adult.
• Factor in Debts: If you have significant debts like student loans, a mortgage, or credit card debt, make sure your policy is large enough to cover them. For example, if you have $100,000 in student loans, your policy should at least cover that amount.
• Future Goals: Think about future expenses, like your children’s college education or your spouse’s retirement. Life insurance can help fund these goals if you’re no longer able to.

You don’t have to guess—there are online life insurance calculators, like those offered by Forbes Advisor, that can help you estimate how much coverage you need based on your specific situation. The key is to strike a balance between enough coverage and affordability.

Cost of Life Insurance in Your 20s

One of the biggest perks of getting life insurance in your 20s is the cost. Premiums are significantly lower for younger people because insurance companies see them as lower risk. For example:

• A healthy 25-year-old female might pay around $15 per month for a $250,000, 30-year term life policy.
• A healthy 25-year-old male might pay around $18 per month for the same policy.

These rates are much lower than what you’d pay in your 30s or 40s. Several factors can influence your premiums:

• Age: Younger people pay less because they’re less likely to die.
• Health: Good health can lead to lower rates. If you have health issues, premiums might be higher.
• Lifestyle: Smokers or those with risky hobbies (like skydiving) might pay more.
• Coverage Amount: Higher coverage means higher premiums.
• Policy Type: Term life is cheaper than permanent life.

For example, companies like Protective, Pacific Life, and Symetra offer term life policies with monthly premiums as low as $14-$19 for healthy young adults. It’s important to shop around and compare quotes from different insurers to find the best rate for your needs. Some companies even offer no-medical-exam policies, which can make the process faster, though these might come with slightly higher premiums or lower coverage limits.

Where to Get Life Insurance

There are plenty of options for buying life insurance as a young adult:

• Online Insurers: Companies like Ladder, Bestow, and Policygenius offer user-friendly platforms where you can get quotes and apply online. These are often great for young adults who want a quick and easy process. 
• Traditional Insurance Companies: Many well-known insurers, like Transamerica or Symetra, offer competitive rates and a variety of policy options. You can work with an agent or apply directly online.
• Financial Advisors: If you already have a financial advisor, they can help you find a policy that fits your needs and budget.

When choosing a provider, look for companies with strong financial ratings (check sites like AM Best) and good customer reviews. It’s also important to read the policy details carefully to understand what’s covered and what’s not. For example, some policies might exclude certain causes of death or have specific conditions for payouts.

When You Might Not Need Life Insurance in Your 20s

Not everyone in their 20s needs life insurance right away. If you don’t have dependents and don’t have significant debts, you might not have an immediate need for it. For example:

• If you’re single, live alone, and have no loans or mortgages, the financial impact of your death might be minimal.
• If you’re still in school or just starting your career, you might not have the income or assets to justify a policy yet.

That said, even if you don’t need it now, it’s worth thinking about for the future. As your life changes—getting married, having children, buying a house—your need for life insurance might grow. Plus, starting early lets you lock in lower rates before health issues or other factors drive up premiums. 

Additional Considerations

When buying life insurance, there are a few extra things to keep in mind:

• Riders: These are add-ons you can include in your policy for extra coverage. Common riders include:
  • Accelerated Death Benefit: Lets you access part of the death benefit if you’re terminally ill.
  • Waiver of Premium: Pays your premiums if you become disabled.
  • Child Riders: Provides coverage for your children.
• Reviewing Your Policy: Life changes, so your insurance needs might too. It’s a good idea to review your policy every few years or when major life events happen (like getting married or having kids).
• Honesty is Key: When applying for life insurance, be truthful about your health and lifestyle. Misrepresenting information can lead to your policy being canceled or claims being denied.

Common Myths About Life Insurance

There are a lot of misconceptions about life insurance that might make you hesitate. Let’s clear them up:

• “I’m too young to need life insurance.” While the risk of death is lower when you’re young, life insurance isn’t just about dying—it’s about protecting your loved ones and planning for the future.
• “Life insurance is too expensive.” For young, healthy people, it’s often very affordable. A $250,000 term policy might cost less than $20 per month.
• “I don’t have anyone who depends on me.” Even if you don’t have children or a spouse, you might want to cover your own final expenses or leave a legacy for charity or other causes.
• “I can always get insurance later.” True, but waiting could mean higher premiums or even being denied coverage if your health declines.

Understanding these myths can help you make a more informed decision.

The Life Insurance Application Process

If you decide to get life insurance, here’s what the process typically involves:

1. Research and Comparison: Shop around to compare policies and rates. Use online tools or talk to an agent.
2. Application: Fill out an application with your personal information, health history, and lifestyle details.
3. Medical Exam: For most policies, especially those with higher coverage, you’ll need a medical exam. This is usually quick and can be done at home or at a clinic.
4. Underwriting: The insurer reviews your application and exam results to determine your risk level and set your premiums.
5. Policy Issuance: Once approved, you’ll receive your policy and start paying premiums.

Some insurers offer no-medical-exam policies, which can be convenient for young adults. Just keep in mind that these might have higher premiums or lower coverage limits. 

Conclusion

Getting life insurance in your 20s can be a smart financial decision. It provides protection for your loved ones, helps cover debts, and allows you to lock in lower premiums while you’re young and healthy. While it might not be necessary for everyone—especially those without dependents or significant financial obligations—it’s worth considering as part of your long-term financial plan.

By understanding the different types of policies, figuring out how much coverage you need, and knowing where to get it, you can make an informed choice that fits your current and future needs. Life insurance isn’t just about protecting against the worst-case scenario—it’s about giving yourself and your loved ones peace of mind.