Life insurance may be the last thing on a young adult’s mind, but there are significant benefits to opening a policy now
Key takeaways:
- Life insurance can have great value for young adults
- Only a third of Gen Z has coverage
- Not only does it protect family members, but it can also build wealth and help pay off debts
You’re a proud adult member of Gen Z. You’re 18 to 24; you’re young and healthy; you’re the perfect candidate for…life insurance? Believe it or not, yes.
Simply put, life insurance is a safety blanket that protects the ones you love if anything tragic should befall you. If you’re married, have kids, or even just got engaged, life insurance can help your family with their expenses and cover your unpaid debts should the unthinkable occur. And even if none of these things apply to you right now, life insurance is still worth considering because it’s a valuable investment opportunity that can help you build wealth.
If you’ve been considering purchasing life insurance, you probably have lots of questions. What kind of coverage should you get? Where do you even start looking? Below, we’ll walk through how to find a policy that’s right for you.
Why you should buy life insurance (and why many don’t)
As a member of Gen Z, you actually have an advantage in the life insurance market. You’re probably going to live longer than most other policyholders, so you qualify for lower-cost coverage. And yet, 86% of young adults are hesitant to buy it. Indeed, this generation is sorely underinsured – only 34% actually have coverage. There are many reasons for this:
- 27% think they won’t have enough to pay the monthly premiums. Insurers usually look at your health and age when setting rates. The longer you’re expected to live, the less risk you pose, so the lower your rate will be. The cost goes up as much as 9% a year as you age, so it pays to lock in lower rates now.
- 23% are concerned they’ll pick the wrong amount of death benefit. Only 13% are very confident that they’ll grab the right coverage.
- 21% worry they won’t even qualify.
With all this hesitation, you might think that Gen Z would be skeptical about sitting down with an insurance professional when it comes time to sign up for a policy. But you’d be wrong—nearly half of this generation prefers to research life insurance online, but ultimately buy in person. Face-to-face communication seems to still be important for big economic decisions across all generations.
Life insurance helps your friends and family
As we mentioned earlier, life insurance protects a spouse and/or children from unforeseen financial hardship. But it also can benefit anyone who has co-signed on certain kinds of loans, mortgages, or credit cards. It’s not uncommon for young adults to have parents or other relatives co-sign for these things, and if you don’t have life insurance, they’ll be left holding the bag for these outstanding debts if anything should happen to you, which could have a negative impact on their credit scores.
Life insurance can also help cover funeral and burial expenses. Obviously, this is a topic no one wants to think much about, but the reality of it adds up in a hurry. In 2021, the median cost of a funeral with burial in America was almost $8,000. And cremations aren’t much more affordable, coming in with an average cost of about $7,000.
Finally, it’s worth noting that your employer may not provide the level of life insurance coverage that you require, particularly if you’re the primary earner in your household. Basic group insurance coverage is common, but it may fall short of your needs, and may not travel with you if you change jobs.
What kind of life insurance is right for you?
If you’re one of the 66% of Gen Z that feels intimidated enough by the process that they don’t have life insurance coverage, let’s break down the different types of life insurance:
- Term life insurance. This tends to cost less and cover less. It provides coverage for a predetermined period of time, typically 10 to 30 years. If you pass away, your beneficiary gets the death benefit. But after it expires, there’s no cash value.
- Whole life insurance. This requires you to pay more, but you’ll be covered for the rest of your life as long as you keep up the monthly premiums. It gives your beneficiaries a death benefit and also provides cash value, which allows you to make withdrawals or take out a loan if needed. Although they cost more, whole life policies are great tools for growing wealth and handling financial obligations throughout your life.
All that being said, there are pros and cons to buying life insurance at a young age.
Pros and cons of Gen Z life insurance
There are drawbacks and upsides to any life insurance policy. Do a little digging to make sure a plan works for you.
Pros
- It provides for those closest to you after you pass away.
- It ensures that your debts are taken care of and not put on the shoulders of your family.
- It’s surprisingly affordable if you choose the right plan.
- Cheaper premiums are available to young and healthy policyholders.
- It lets you start building wealth for the future.
Cons
- It’s another monthly expense when you may not have established your earning power.
- You may never use it.
- The process of choosing a policy can be daunting.
The good news is, there are people out there who can help walk you through this process.
Talk to a professional
A financial decision like purchasing life insurance is a big deal that can easily feel like an overwhelming burden. The best way to handle it is to educate yourself about different types of coverage so that when you’re ready to purchase a policy, you’re confident about what’s best for you.
And it never hurts to have friends in your corner looking out for you. NICRIS Insurance has a team of professionals who will have your back when it comes time to opt into a plan. We’re ready to sit down for a free, personalized review of life insurance options that work for your budget.