Six Facts about Life Insurance that Every Young Person Should Know
As a young adult, it can be difficult to see beyond the end of the week, let alone years into the future—especially when it comes to finances. However, it is never too early to start planning for the future, and life insurance should be included somewhere in your financial and legal planning. Life insurance can feel like an abstract idea, and something that is too early or confusing to be considered. Whether your need for life insurance is years away, or already upon you, here are six facts that will help any young person navigate through the confusing waters of life insurance.
Do I need life insurance?
If you are without dependents, it may be more financially risky to purchase a life insurance policy. You will end up paying premiums for a long period of time if you do not anticipate having any dependents to care for. If you are married with children, or anticipate being so in the near future, it might be a good idea to sign up soon to guarantee your insurability.
How much life insurance will I need?
This question can be answered in two ways. First, you can consider your current income and age. One rule of thumb is to take the number of years you plan to work, and multiply that number by your income to give you the necessary grand total. The other approach is needs-based. This strategy factors in a working or non-working spouse, number of dependents, and outstanding debt, and is more individualized. Obviously, you might not be able to anticipate the loss of your job, or an injury, however, this formula is typically the easiest way to calculate how much life insurance you need.
What type of insurance do I need?
The two types of life insurance are term-based and cash value/permanent. Term based life insurance allows you to specify the amount of coverage needed and the amount of time the policy should remain effective. These often have lower premiums that remain stable over time. Cash-value policies are quite complex, but essentially they cover the policy holder’s entire life, accumulate value over time, and have higher premiums. An insurance agent can help you determine what type of insurance is best for you based on your income/age calculations and other factors that pertain to you personally.
Can I afford life insurance?
It is important to consider the initial premium prices and any potential premium increases prior to purchasing a policy. Coordinating with a financial advisor can help you determine what you can afford both now and over time. In some cases, you can start at a lower premium and increase your coverage as your income increases and you have more dependents.
Will I be able to renew my policy?
Most term policies will be able to be renewed when expiring, even if your health has changed in the meantime. There may be premium increases, and it is important to learn about your policy before purchasing. Be sure you obtain details of possible increases in the future, so that you aren’t surprised when your coverage expires and the terms change.
How can an insurance agent help me?
An insurance agent will have knowledge and expertise in the different policies and their drawbacks and benefits. Your agent can also help explain complicated policies and answer any lingering questions. Some think that insurance agents are there to swindle you, however, they want to maintain your business, so if you ask smart questions, they will help you understand exactly what you are getting into.
If you are a young person, life insurance can seem daunting, however, it is important to think about securing the future of your loved ones at any stage in adulthood. As with anything related to finances, the more educated you are the less likely it is that you will make a mistake. Do your own research and talk with a life insurance agent who can answer your questions and help educate you on the subject so that you fully understand your coverage and responsibilities. The information for this article was provided by the Orillia lawyers at the Littlejohn Barristers legal group who specialize in many areas of law and assist clients with life insurance.
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Category: Insurance
