Tips for Purchasing Life Insurance In Your Twenties

One of the best investments an individual in their twenties can make is life insurance. It's inexpensive and provides peace of mind now and into the future.

Life Insurance Your Twenties

When you’re in your twenties, purchasing life insurance is a financial matter you usually don’t think much about. This is because you’re young and likely haven’t established a family, and so it’s the last thing on your mind. This is just one of many reasons why life insurance is often overlooked by young individuals.

Perhaps you think it’s a useless investment, or maybe no one really took the time to explain to you what life insurance is all about, or maybe you’re not willing to shell out a few extra dollars per month. Whatever your reasons, it’s time to understand the importance of why you need to start buying life insurance when you’re young.

Why Life Insurance In Your Twenties is a Good Buy

Let’s start with the most obvious reason why you should invest in life insurance in your twenties and beyond: it provides you with ample financial protection from unfortunate situations such as an untimely death.

It’s a fact of life that accidents can and do happen, so it is only beneficial to have a plan in case of this. It provides peace of mind for you and your family and that alone is worth the small investment that an affordable life insurance policy costs.

This leads to another important reason to purchase an insurance policy in your twenties – It’s cheap. I mean really cheap. This is because you are young and in most cases, in peak health – this is a winning combination when it comes to rates.

A healthy 25 year old man can get a $1,000,000 term life insurance policy (20 year term) for under $40 per month. The rate for a 25 year old female is under $30 per month. This is dirt cheap and you can lock in that rate for two decades.

So if you are thinking about purchasing a policy, you should definitely look into it. Some think it is a difficult or confusing process, but it is actually pretty simple. Here are some things you should know during the process.

Understand exactly what you need

Whatever your age or life stage, the first step in purchasing life insurance is conducting a needs analysis. Several online life insurance calculators can provide a benchmark to give you a general idea of how much life insurance you should purchase in your twenties. You can also use a common starting point, which is seven to 10 times your annual salary. This is a general rule of thumb.

It is also beneficial to make a list of all of your current debts such as a mortgage, credit cards, auto loans, credit cards, student loans etc.

This exercise is helpful in pinning down the amount you realistically need to obtain, as well as figuring out how much you can afford to pay on a month to month basis (or annually if you choose to pay that way).

Keep in mind that rates are ridiculously low at this age so you can get a very large amount of insurance for a small rate. Your best bet is to get as much as you can afford.

Attend free seminars on insurance

Since insurance is a commodity that most people overlook, a lot of organizations are making sure they raise awareness of its importance in future planning. For example, the Life and Health Insurance Foundation for Education (LIFE) is a nonprofit organization that educates consumers about financial planning and insurance. They often hold free talks that you can easily sign up for. These sponsored talks are a great platform to learn more about purchasing insurance, whether you are in your twenties or your seventies.

Educate yourself about the terms

Most people buy insurance without even understanding what the different kinds of life insurance are. For starters, here’s a lowdown on what you need to know:

Term life insurance insures you for a specified time frame – say 15 or 20 years – while permanent insurance remains in force as long as you continue paying the premiums. Permanent life insurance is sometimes also called cash-value insurance because it can accumulate savings on a tax-deferred basis.

Research rates online but work with an agent if you need personal assistance

The wonderful world of online shopping has graced every aspect of our lives, including the process of buying a life insurance policy. These days you can shop and compare rates, apply for a policy, and pay for your premium all from the comfort of your home. For some this is comfortable and preferred, while others still prefer the good old fashioned way of buying life insurance through a trusted agent.

The way you obtain your policy is up to you. Just keep in mind that unlike shopping for a new phone plan or buying a new pair of heels, selecting the right kind of insurance coverage can be more complicated than that, particularly if you have health issues.

An insurance agent can assist you with picking the most affordable and best rated company for your needs, as well as walk you through all of the important details of your insurance policy. It may be overwhelming to discuss these details, but it helps to understand exactly what you’re paying for.

Do your homework and make sure you purchase insurance from a reputable company

When you are in your twenties, you have your entire life ahead of you – we’re talking about 40, 50, or 60 years. Chances are high that you will have an insurance policy for quite some time so it’s vital to choose a reputable company with solid financial standing and a record of good customer service.

Not only does this serve as a good filter in eliminating struggling companies or possible scams, it also helps ensure your investment is in good hands. Also, according to Larry P. Ginsburg, an Oakland, California-based certified financial planner and a board member of United Policyholders, “You want to purchase insurance from a company that has a history of paying claims, that has a strong financial rating.” This is particularly good advice, as some insurance companies in the past have gone bankrupt because of mismanagement and poor leadership within the organization.

Ask for a referral

One of the best things you can do is ask friends and family for multiple referrals to reputable insurance agents. Not only will this provide you with enough confidence that the persons you’ll meet with are credible and knowledgeable about the topic, they’d be less likely to over-promise, as they are accountable to the persons who referred you. This method is definitely better than randomly entertaining sales pitches from insurance agents who call you through the phone.

Life insurance is a solid investment at any age.

Truth is, one of the best investments twenty-something individuals could ever make is life insurance. Not only does it serve as a profitable and stable investment compared to stocks, bonds and mutual funds, it also helps you prepare for a lot of uncertainties about the future. If you’re looking for a policy, you can start your research now by comparing rates online from top rated companies.

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