Millennials have often been referred to as the “delay generation.” Whether it’s homeownership, starting a family, or making long-term financial plans, many millennials find themselves pushing off decisions that previous generations approached earlier in life. Life insurance is one such area where millennials may feel they can afford to wait. After all, when you’re young and healthy, the idea of needing life insurance doesn’t seem pressing. But this mindset can leave millennials vulnerable to financial hardship in the future. In this post, we’ll explore the misconceptions around the urgency of life insurance for millennials and explain why purchasing coverage sooner rather than later is one of the smartest financial decisions they can make.
Why Millennials Often Delay Buying Life Insurance
Millennials, born between 1981 and 1996, grew up during a time of technological revolution, shifting societal norms, and economic uncertainty. This has greatly influenced how they make financial decisions, including the decision to purchase life insurance. Here are several reasons why millennials may be delaying buying life insurance, even when they recognize its importance:
1. Low Perceived Risk
One of the most significant reasons millennials put off buying life insurance is their belief that they’re still young, healthy, and therefore not in urgent need of coverage. Many think that life insurance is something to consider once they have dependents or when they’re older, potentially in their 40s or 50s. But this mindset ignores a critical fact: life insurance is often more affordable the younger and healthier you are.
The longer millennials wait, the higher their premiums will be when they eventually decide to purchase coverage. This is because life insurance rates are largely based on age and health status at the time of application. A healthy 30-year-old, for example, will typically receive much lower premiums than a 40-year-old with a pre-existing condition. By delaying, millennials miss out on locking in lower rates and potentially put themselves in a position where they could be denied coverage altogether due to health changes.
2. Prioritizing Immediate Needs
Millennials often have competing financial priorities, from paying off student loans and credit card debt to saving for a house or investing in experiences like travel. Life insurance can easily fall to the bottom of the list when compared to these immediate financial pressures. Unlike tangible expenses such as rent or a car payment, life insurance can feel like an unnecessary cost when there’s no immediate need for it. However, this is where many millennials make a costly mistake.
Life insurance isn’t just for those with dependents. Even if a millennial doesn’t have children or a spouse, they may still have financial obligations that life insurance can help cover in case of an untimely death. For example, some millennials may want to ensure their student loans are paid off or that their loved ones won’t be burdened with final expenses such as funeral costs. Additionally, life insurance with living benefits can offer a safety net if the policyholder becomes critically ill or disabled and needs financial support while they’re still alive.
3. Misconceptions About Cost
Many millennials believe life insurance is far more expensive than it actually is. A 2021 survey from LIMRA found that over half of millennials overestimate the cost of life insurance by as much as threefold. This misconception can deter them from even exploring coverage options.
The truth is, life insurance, particularly term life insurance, is often quite affordable for young and healthy individuals. Term life insurance provides coverage for a set number of years (usually 10, 20, or 30 years) and is typically less expensive than permanent life insurance options like whole life or universal life insurance. For example, a healthy 30-year-old might be able to get a 20-year term policy with a $500,000 death benefit for less than $20 per month. By educating millennials about the actual costs, life insurance agents can help break down this barrier and encourage more individuals to seek coverage.
Why Millennials Shouldn’t Wait to Purchase Life Insurance
It’s easy to see why millennials might feel like they can afford to put off buying life insurance, but the reality is that waiting can have significant consequences. Here are several reasons why it’s crucial for millennials to prioritize life insurance sooner rather than later:
1. Locking in Lower Premiums
As mentioned earlier, life insurance premiums are largely based on age and health status. By purchasing life insurance while they’re young and healthy, millennials can lock in much lower premiums than if they wait until they’re older or have developed health conditions. Even a small difference in age can result in higher premiums, especially if a millennial waits until they’re in their 40s or 50s to buy coverage.
For example, let’s say a 30-year-old woman purchases a 20-year term life insurance policy with a $500,000 death benefit for $15 per month. If she waits until she’s 40 to buy the same policy, she might end up paying $30 per month or more. Over time, that difference in monthly premiums can add up to thousands of dollars in additional costs.
Additionally, buying life insurance early means millennials can take advantage of good health. If they develop health conditions like diabetes, high blood pressure, or even something more serious like cancer, it could be much more difficult (or even impossible) to get affordable coverage later in life.
2. Protecting Loved Ones
Even if a millennial doesn’t have children or a spouse, they likely have people in their lives who would be impacted by their death. For example, many millennials have co-signed student loans with their parents, which could become a financial burden if they pass away unexpectedly. Having a life insurance policy can ensure that these debts are covered and that their loved ones won’t be left in a difficult financial situation.
Moreover, life insurance with living benefits can be a vital part of a millennial’s financial safety net. Living benefits allow policyholders to access a portion of their death benefit if they become critically ill or disabled. This money can be used to cover medical expenses, pay bills, or even replace lost income. For millennials who may not yet have substantial savings or investments, this feature can provide much-needed financial support during a health crisis.
3. Planning for the Future
One of the greatest benefits of purchasing life insurance early is the ability to lock in coverage that will grow with their future needs. While a 20-something millennial may not yet have children or a mortgage, those life events could be on the horizon. By purchasing life insurance early, they can ensure that they have adequate coverage in place when those responsibilities arise.
Additionally, some life insurance policies, like whole life or indexed universal life (IUL) policies, offer cash value growth, which can be a valuable financial asset in the future. Over time, these policies accumulate cash value that can be borrowed against or withdrawn in the future, providing an additional financial resource for millennials as they navigate life’s challenges.
How to Choose the Right Life Insurance Policy for Millennials
Millennials have a wide variety of life insurance options to choose from, which can make the process feel overwhelming. However, by understanding their financial goals and personal circumstances, they can make an informed decision about the type of policy that’s right for them. Here are a few of the most common life insurance options available to millennials:
1. Term Life Insurance
Term life insurance is often the most affordable option for millennials, as it provides coverage for a set number of years (usually 10, 20, or 30 years) and offers a death benefit to beneficiaries if the policyholder passes away during the term. Since it doesn’t build cash value, term life insurance is typically less expensive than permanent life insurance options, making it a good fit for young individuals who want affordable coverage while they’re paying off debts or starting a family.
2. Whole Life Insurance
Whole life insurance is a type of permanent life insurance that provides coverage for the policyholder’s entire life, as long as premiums are paid. It also includes a cash value component that grows over time and can be borrowed against or withdrawn in the future. While whole life insurance is generally more expensive than term life insurance, it can be a good option for millennials who want lifelong coverage and the added benefit of cash value growth.
3. Indexed Universal Life (IUL) Insurance
Indexed universal life insurance is another type of permanent life insurance that offers flexibility and the potential for cash value growth tied to the performance of a stock market index. This type of policy allows millennials to adjust their premium payments and death benefit amounts over time, making it a versatile option for individuals whose financial needs may change in the future.
4. Life Insurance with Living Benefits
For millennials who want added protection in case of a critical illness or disability, life insurance policies with living benefits can provide peace of mind. These policies allow policyholders to access a portion of their death benefit while they’re still alive, providing financial support during a health crisis. This can be an attractive option for millennials who want to ensure they have financial protection not only for their loved ones but also for themselves.
Conclusion: Life Insurance for Millennials – A Smart Financial Move for the Future
Life insurance for millennials isn’t just about preparing for the distant future; it’s about taking proactive steps to protect their financial well-being and provide security for their loved ones. While it’s easy to put off buying life insurance, the benefits of purchasing a policy sooner rather than later far outweigh the costs. By locking in lower premiums, protecting loved ones from financial hardship, and planning for the future, millennials can take control of their financial future and ensure they’re prepared for whatever life throws their way.
Whether through affordable term life insurance, permanent options like whole life or IUL policies, or coverage with living benefits, millennials have a range of options to choose from. The key is understanding the urgency. Contact Eugene Financial Services today to learn more.
