Life insurance for the young? Not a bad idea
Between my husband and I, we shell out hundreds of dollars every month in insurance. And it makes sense – we have a house, we’re both self-employed, we’ve got two small kids…and we’re not young. I’m in my 40s and my SO has passed the 50 mark. Life insurance at our age doesn’t come cheap, but it makes sense for us because we have dependents. But what about people in their 20s? It’s certainly not intuitive, and most advisors wouldn’t recommend life insurance until you buy your first home, get married or have kids.
But while death is the last thing on a young person's mind, more and more people are making a case for life insurance at an earlier age – if, of course, you’re healthy enough to buy it cheap. These days, a $250,000 policy can be had for as little as $150 a year according to this source – a tidy sum. And while you may not want to think about death and dying already, here are five reasons to consider putting money towards a term life insurance policy:
1. You owe money to someone
A lot of parents go into debt to help their kids through school or to buy a new home. If you owe a significant amount of money to your parents or another relative, it could leave them with a big financial burden. A life insurance policy would solve the problem pretty easily.
2. It can be cheaper to buy when you’re young
My husband and I didn’t get life insurance until we were in our 40s, and our term policies cost us a goodly amount every month. Considering that a healthy non-smoking 25-year-old can get a term life insurance policy for 25 years for as little as $25 month, that could end up saving you money down the road.
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3. You could leave a financial legacy
If something were to happen, it’s one way to ensure that your loved ones will benefit from an inheritance.
4. Pay for the funeral
Having a life insurance policy will make sure that you’re not leaving a financial burden for those you leave behind – a small policy can cover the costs of your funeral and other expenses related to your death.
5. Use life insurance for your parents….
This suggestion came from an article in the Financial Post. If your parents aren’t able to leave you any money, ask them to arrange for a life insurance policy naming you as the beneficiary – and then pay the premiums. In theory, it’s a pretty compelling idea, provided you can afford to pay the premium (depending on the age and health of your folks this can be pretty hefty). In my case, I know what my mother would say (get lost gold digger!) – but you might have better luck with your parents….
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Caroline Cakebread has been Chatelaine.com's money expert since 2006. She is also a recovering academic and the mother of two small kids. She lives in Toronto where she writes and reads about all things financial.
