Should Millennials Purchase Life Insurance?
July 21, 2016
Many millennials are preparing for the next steps in their lives. They are in their 20s, maybe have a college degree, maybe own a car and a home. They could even have a significant other and some kids.
Responsibilities are piling up, and with them come bills, debt and shoestring budgets.
People realize they have to insure their car, and investing in house or tenant insurance is a smart bet too. If there was one thing beyond the obvious we recommend for almost everyone, it’s life insurance.
There are three main types of life insurance in Canada: Term Life, Whole Life and Universal Life. For most young people, we’d recommend Term Life. It’s the cheapest by far, and your rate is set for the term of your life insurance (5, 10, 20, 30 years). It doesn’t accumulate any value, but it is easy to understand. It’s the most popular form of life insurance used today.
Too often young people think they are invincible and will live forever. Here’s the general rule of thumb: once someone depends on your income, it’s time for life insurance.
Here’s an example using a 25-year-old male. He’s about to buy a starter home for $250,000 with his wife. Combine that with approximately $20,000 more debt between his student loans and a car he bought a few years ago. Add in her $20,000 for similar reasons, and this couple is sitting at nearly $300,000 in debt.
If something happened, she would be in for a lifetime of financial issues, combined with the crippling sadness of losing her loved one.
He was interested in a $500,000 life insurance policy to make sure she had a cushion if the worst ever happened.
The cost? Only $30 premium for a 10-year term. $30 dollars a month for peace of mind and financial security for your loved one.
Now what if you aren’t at this point in your life? You may not be buying a house, but you could still be sitting at $20,000 in debt between student loans and a car. A policy worth $50,000, which would be significantly less than $30/month, might be more in your wheelhouse for your family’s security.
While the other two types of life insurance cost significantly more, they come with advantages as well. An informed insurance broker will help you decide what insurance is right for you.
Here’s a handy guide produced by the Canadian Life and Health Insurance Association.