Why Should You Buy Life Insurance At a Young Age?

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Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated on November 5, 2024

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Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated November 5, 2024

Visit author page

4 minute read

Article Contents

Life insurance is crucial for providing for your loved ones’ financial future, giving you peace of mind during your working years. Despite these benefits, younger Canadians may be reluctant to spend on life insurance because they feel it’s too expensive or they don’t need it until later in life. However, getting life insurance while young can be better than waiting when you’re older.

Life Insurance for Young Adults at a Glance

  • While permanent life insurance is pricier than term life insurance, it’s worth the investment if you can afford the higher premiums and want to lock in the most favourable rates for lifelong coverage while you’re young.
  • Even if you’re young and healthy now, life insurance is a safety net for your dependents in case of an unexpected illness or accident. If something were to happen to you, your policy would give them financial security.
  • Young adults on a tight budget should also consider employer-sponsored group life insurance. They tend to have lower premiums and a simplified application process. Some plans even allow you to take your coverage with you if you change jobs.

Why should you get life insurance at a young age? Read on to learn how its advantages can help you plan systematic savings and how to navigate coverage costs without breaking the bank.

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What Are The Financial Benefits of Getting Life Insurance Early?

Young adults who are still starting their careers may not consider getting life insurance. As many are still in entry-level jobs at this stage of their lives, they may be on a tight budget and have other priorities. But here’s why you should get life insurance in your 20s or early 30s instead of later:

Lower Premiums

One of the most compelling reasons for buying life insurance while you’re young is saving a ton on premiums. Life insurance companies consider age and health when assessing the risk of providing coverage, and younger applicants are generally considered at lower risk for developing health issues or suddenly passing away.

This results in lower initial premiums that remain fixed for the duration of the policy – for example, a 28-year-old may pay significantly less than a 40 or 50-year-old for the same coverage.

Cost-Effective Coverage

Over time, the total amount that you’ve spent on life insurance premiums may be substantially lower if you start early. For example, a 30-year term policy purchased at 25 may cost you thousands less than if you buy it at the age of 40, especially if you develop health conditions later on.

More Favourable Underwriting

If you wait later in life to get life insurance, you may face higher premiums because of the higher likelihood of developing certain health conditions like hypertension or diabetes over time. You may even be denied coverage outright if you develop certain especially serious conditions. Starting a life insurance policy while you’re younger will help you secure coverage before any of these issues develop.

Why Should You Buy Life Insurance Young

Incorporating Life Insurance in Financial Planning

As you navigate your young adult years and financial responsibilities, life insurance can be a key component of a comprehensive financial strategy. Here’s how you can make a policy part of your plan to provide for your loved ones and improve your financial well-being.

Future Security for Dependents

You may not have dependents now, but if you plan to start a family, having life insurance ensures that your dependents will have a much-needed source of funds they can draw on in the future if anything happens to you. The cash value that accrues over time can also be used as an additional savings or investment component for your family later on. This can help them cover estate costs or big future expenses like college tuition or a mortgage.

Protection from Debt

In the event of your untimely passing, your beneficiaries can use your life insurance’s death benefit to pay off debts and prevent financial burdens. For example, if you had a mortgage on a house with your partner, the death benefit can help them pay off the remaining balance. Likewise, if you have co-signed debts like a student loan or credit card debts with your partner or other family members, the death benefit can keep them from having to cover those debts on their own.

Long-Term Implications of Different Policy Types

The type of life insurance policy you choose can have significant implications for your financial future in the long term. Understanding each type’s drawbacks and advantages will help you align your coverage with your life goals. Here’s a quick breakdown of some of the most common types of life insurance:

Term life insurance only provides death benefits to beneficiaries if the policyholder dies within the policy’s term, which can range anywhere from 10 to 30 years. This temporary coverage is typically more affordable, making it easier for young adults to fit into a budget. It also offers flexibility as you can choose a policy duration that matches specific needs, like the duration of a mortgage or until your dependents are of legal age.

On the other hand, term insurance has time-limited coverage and no cash value component. Think of it as a temporary safety net – you can always consider getting a new term policy when your previous one ends or changing to a permanent life insurance policy once it’s easier to fit into your budget.

Permanent life insurance offers lifelong coverage and can be more expensive. However, it’s beneficial for estate planning as it leaves a tax-free death benefit for beneficiaries. The premiums also contribute to a cash value that increases over time on a tax-deferred basis, which you can borrow against at lower tax consequences compared to other options like a bank loan.

Some types of life insurance such as universal life insurance allow you to invest part of the cash value to potentially increase its returns beyond the accrued cash value. This can make a policy a valuable way to pass down more wealth to your loved ones, helping them cover later costs like daily expenses and your end-of-life medical bills.

Key Advice from MyChoice

  • Don’t settle for the first quote you get. Different life insurance providers have different underwriting processes and weigh the same criteria differently. Comparing quotes from different providers will help you find the best rates for your preferred coverage.
  • Some insurers offer discounts for maintaining a healthy lifestyle or bundling your life insurance with other policies. Be sure to ask about any available discounts when getting quotes for life insurance for young adults.
  • Depending on the type of life insurance policy you get, you can also invest its accrued cash value in different financial instruments. Talk to your life insurance provider to learn more about your options for increasing returns over time through investments.

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