Life insurance for young adults

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Most people only start to consider life insurance once they get older. Unfortunately, this means that they may miss out on the benefit of getting coverage when they are younger and premiums can be cheaper. The best life insurance for young adults may provide a lifetime of coverage that can adapt to your ever-changing needs. If you can see insurance as more than just hedging against a vehicle accident, injury or death, life insurance can be a useful part of financial planning.

What is life insurance for young adults?

Life insurance for young adults is the same type of coverage any other buyer would look at. However, the financial goals may be different. An older adult may be thinking about life insurance as a way to leave children, grandkids or a spouse a lump sum of money after they pass away.

Young adults may consider term, whole or a universal life insurance policy as a way to start building towards retirement, to cover future estate taxes or to guarantee coverage before they develop a hard-to-insure medical condition.

Why get life insurance as a young adult?

The best time to buy life insurance was yesterday. Cheap insurance for young adults is easier to find than for someone in their thirties or forties. Some of the reasons why you should consider buying life insurance while you are young include:

To lock in affordable premiums

Buying life insurance when you are young and less likely to develop a life-threatening condition means your premiums will be far cheaper. Life insurance typically lasts between 10 to 30 years for a term policy or forever for a permanent policy. Once you get coverage, you generally cannot be canceled as long as you continue to pay your premiums, even if you become chronically ill later. That is why it is best to lock in coverage early.

To save you from paying higher prices if your health deteriorates

Most life insurance policies require you to pass a health evaluation or medical exam before they insure you. If you have a medical condition, it will likely show during the medical exam, affecting the cost of coverage or leading to a denial. As mentioned already, once you are locked in with life insurance coverage, your insurance company usually cannot increase your life insurance rate because your health deteriorates. If your family has a chronic or genetic illness history, getting coverage early before the condition develops may be a good way to guarantee yourself a lifetime of insurance before it becomes difficult or expensive.

To have more time to build cash value

A permanent policy may be the best insurance for young adults. Permanent life insurance does not end as term insurance would. In addition, permanent life insurance adds an investment element. Your premium goes towards the death benefit amount you may leave to your beneficiaries and a cash value account you can grow and access throughout your life. As with all savings and investments, the sooner you get started with a permanent life insurance policy, the larger the cash value will grow over the years.

Term life insurance vs whole life insurance

There are two main types of life insurance available: term and whole life insurance. Term life insurance provides coverage for a set period of time, typically 10, 15, 20 or 30 years. It tends to be cheaper, but coverage lasts only as long as the term. Whole life insurance does not expire and does more than leaving a payout to the beneficiaries you name. It also builds a cash value for your use while you are alive. You may be able to borrow against the cash value or draw from the funds.

When you might not need life insurance

There are times when you may not need life insurance. Some of the reasons a life insurance product may not be worth it include:

  • You are definitely not having a family: If you are certain you will not have kids or marry, there may not be anyone to leave a payout to after you pass. However, life takes many turns. You never know what your life will be like in 10 or 15 years. If you still stand firm on not having a family down the road, you could leave your life insurance benefit to a church or a favorite charity.
  • You are financially sound: If you are debt-free and have sizable savings, life insurance to pay for your debts after you pass or to cover your burial expenses may not be necessary.
  • You don’t make any excess income: Higher-earning individuals that end up maxing out their retirement accounts need additional places to put cash away. A permanent life insurance policy could be such a place. But if you don’t have any money left after you contribute to your IRA or 401(k), a life insurance policy to use as an additional investment may not be necessary.

Frequently asked questions

Should I choose whole life insurance or universal life?

Young adults who have time on their side can be more aggressive with their investing strategy, as long as they are comfortable with market fluctuations. A whole life insurance policy’s cash value earns nominal interest similar to a savings account and may not be ideal. Universal life policies allow you to invest the cash value in stocks and mutual funds that could provide a larger return. Equities have more potential for growth but come with more risk. Choosing an index universal life policy exposes you to moderate risk and allows you to invest in an index, such as the S&P 500, which has historically performed well over longer investment timelines of 10 to 20 years.

Is the death benefit I leave taxable?

Generally speaking, the death benefit of a life insurance policy is passed on to your beneficiary tax-free. They will not have to worry about paying tax on the life insurance payout you leave them.

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a finance and business journalist who has been featured in Bankrate, Business Jet Traveler, MSN,, and She regularly travels to Africa and the Middle East to consult with women’s NGOs about small business development and works with select startups and women-owned businesses to provide growth and visibility.