It is normal for younger people to think that life insurance is not for them as for now the world is their oyster and the last thing they are worrying about is their health and dependents.
Young people who have just started earning may also be on tight budgets and paying monthly premiums on a life insurance policy along with everything else they need to pay for may seem unnecessary at this point in their lives.
However, we are here to tell you that getting life insurance coverage at a young age, in your 20s or 30s can be a very smart move on your part and can lead to considerable benefits and advantages as you grow older.
This article will shed light on the importance of considering life insurance at an early age and why it could be beneficial both in the short and the long run.
The Importance of Life Insurance For Young People
The most obvious reason why someone would consider a life insurance policy is because they want to financially protect their loved ones in the event of their untimely demise.
The death benefit paid out by a life insurance policy to your assigned beneficiaries can help them cover funeral expenses, pay off any outstanding debts, cover their foreseeable monthly expenses, and meet other needs.
However, this isn’t the only reason why life insurance is beneficial or necessary. In many cases, life insurance policies can act as a financial cushion helping to ensure future financial stability.
The younger you start the greater the benefits tend to be which brings us neatly to our next heading:
6 Reasons Why Young People Should Consider Getting Life Insurance Coverage
Even if you are in your 20s and don’t have dependents, as you are not married or have children, life insurance policies such as permanent life insurance can provide several tax-saving advantages and help you save up money on top of your insurance protection.
Here are a few other reasons why you should consider getting life insurance coverage at an early age.
- Offers Protection & Savings
Permanent life insurance policies have a cash value feature that acts more as a “living benefit” than a “death benefit”. This is because every time the insured pays a premium amount a portion of that amount is set aside in the policy’s cash value account.
The funds in the cash value account accumulate interest over the years and act as a high-interest saving account that can be cashed out to pay for your future wedding, down payment on a new home, or even exotic vacations.
The earlier you start the more you save and the more you make in interest.
So, along with the insurance protection it provides to your loved ones, this type of insurance coverage is also a big step towards achieving your future financial goals.
- You Get Better Rates
When you are looking to buy a life insurance policy you generally pay a fixed premium that remains the same until the duration of your policy. In most cases, the premium amount only changes if you change the coverage amount.
So, as most people who are in their 20s and 30s are healthy and at a much lower risk of dying or developing any serious health conditions the premiums they pay are going to be much lower than someone looking to buy life insurance in their 40s or 50s.
Locking in a lower rate premium for a term policy of 20 or more years while still in your 20s can mean considerably lower premiums for decades to come and the peace of mind of knowing your loved ones will be taken care of financially in case anything were to happen to you.
- Helps Build Up Your Credit Score
When investing in a permanent life insurance policy at an early age you are also helping build up your credit score. By making regular premium payments on time you are not only boosting your credit score but also building up a reserve of cash that you can borrow against anytime in the future.
- A Policy Is Never Set In Stone
Most insurance policies offer quite a lot of flexibility to help adapt to the policyholder’s changing life needs. If you don’t have dependents now doesn’t mean you won’t have them in the future.
That is why locking in a low-premium policy when you don’t have any dependents can be so beneficial. As the rates are locked in, when you do have dependents such as a spouse, children, or aging parents you will already have a life insurance policy in place that has a very low premium compared to what you would get if you were to invest into one now.
- Better Premium Rates On Auto & Home Insurance
By investing in a life insurance policy early you pave the way for better insurance rates on your vehicle and home in the future. Many insurance providers will offer discounted rates on auto and home insurance for existing life insurance policy holders helping you save money on all types of insurance costs.
- Tax-Saving Benefits
Both term and permanent life insurance policies offer a death benefit payout that isn’t subject to any federal income tax. Your beneficiaries will receive the full coverage amount without any tax deductions in the event of the policyholder’s death.
A permanent life insurance policy also offers tax-deferred growth on the money saved in the cash value account. This means you don’t have to pay any tax on the interest gains you make on your cash savings until you decide to withdraw.
TOP TIP: You can take out money from your cash value account as a loan as well to avoid any tax on your gains! You could also withdraw that money when you retire as you will fall under a lower tax bracket during retirement, helping you save a considerable sum of money that would otherwise have to be paid as income tax.
Before Opting For a Life Insurance Policy Always Consult With The Experts!
Choosing the right insurance policy can be instrumental in setting up a sound financial plan that helps meet your needs now and in the future.
This is why it always pays to speak to a Life Insurance Advisor who can help guide you on what life insurance policy is best for your needs and your financial circumstances.
Our experts at McIver Insurance help do just that and this is why we are Nova Scotia’s most trusted insurance brokerage firm!
For more information call us at 1-902-220-3279 or email [email protected]