Why don’t more young adults buy life insurance? Shopping for life insurance may seem confusing, boring, or unnecessary…but when you have kids, get married, buy a house or live a lifestyle funded by significant salaries, the need arises.
Finding the right policy may be simpler than you think. There are two basic types of life insurance – term and cash value.
Cash value (or “permanent”) life insurance policies offer death benefits and some of the characteristics of an investment – a percentage of the money you spend to fund the policy goes into a savings program. Cash value policies have correspondingly higher premiums than term policies, which give you death benefits only and have terms of 10 years or longer.
Term may be a good choice for young adults because it is relatively inexpensive. But there is an economic downside to term life coverage: if you outlive the term of the policy, you and/or your loved ones get nothing back. Term life policies can be renewed and some can be converted to permanent coverage.
The key question is: how long do you plan to keep the policy? If you don’t want to pay premiums on an insurance policy for more than 10 years, then term life stands out as the most attractive option. If you are just looking for a short-term hedge against calamity, that’s the whole reason behind term life insurance. If you’re getting into estate planning, then it is generally advised to get permanent life insurance, which may prove a better choice.
Spend some time with a life insurance expert at Al Rasch & Associates for a preliminary look at your life insurance options.