Life insurance. It’s not the most talked about topic in today’s conversations.
In fact, many people avoid inquiring about it at all, believing it’s a scam and not realizing the true benefits of purchasing a policy. However, life insurance is one of those important, forward-looking purchases we can make as an adult – and, it’s not just for those of us who are already several years or further along the path of adulthood; it’s equally important to purchase life insurance for young adults.
For young adults, not only are the premiums generally lower, but a term life insurance policy can help make an unimaginably difficult situation less stressful by reducing financial challenges. For example, in an unfortunate worst-case scenario, if you have a young adult in college and have co-signed a private student loan with them and your child suddenly dies unexpectedly, you would be stuck with that debt.
For young adults, debt is not uncommon. In fact, 55% of bachelor’s degree recipients graduating from four-year public and private nonprofit colleges in 2020 had student loan debt; the average debt was $28,400 in 2020 and is a true representation of why purchasing life insurance for a young adult is such an important consideration.
Let’s say your college graduate came back home and suddenly passes prematurely with a $25,000 balance in student debt. That debt is then left for you to repay as that’s the agreement you’ve signed onto with the banking institution. In an unthinkable situation such as this, pre-planning provides you with a better advantage; it’s far easier to figure out exactly how you’re going to settle this unexpected debt when you already have a plan to cover off this worst-case scenario.
Part of gaining this advantage will include determining how much coverage you will need to protect your child’s student loan. To do this, the following will need to be taken into consideration:
- The loan balance, including interest
- How long it will take to pay off
- Any other loans you share with your child
Once you have this information, the cost of the life insurance policy for your child will then depend on several additional factors such as:
- Your child’s age
- Your child’s health (if they’re over the age of 18)
- The coverage amount
- The coverage length
Interestingly, although three out of four people say they have a good understanding of life insurance, 50% of people overestimate its true cost. Based on term life policies offered to young adults, on average, a healthy 20-year-old with no family history of disease can secure $100,000 worth of coverage for twenty years at a cost of $10.08 per month ($112.00/year).
This means that by paying approximately $10.00/month now, the $25,000 student loan debt that unexpectedly landed in your lap in the previous example would be readily and easily repaid by the term life insurance policy you put in place. To put this monthly cost into perspective, here are some other items many folks spend their monthly budget on:
Mid-morning coffee from the coffee shop: $70/month
Takeout Lunch: $400/month
Trimming just a few dollars from any of these to spread your monthly budget would make getting and affording life insurance a no-brainer.
You may be further interested to know that our term life insurance packages are offered to you in varying policy lengths (anywhere from five to fifty years), at a fixed rate. This means your premiums are guaranteed to remain the same for the number of years you have requested. Point to note, it would be in your best interest to obtain the maximum term length that you might need as, once your initial term period is up, the automatic renewal for optional additional terms can increase your premium payments drastically.
There’s also some flexibility with term policies in that, should you require more insurance and want to invest in a plan that also creates cash value, you can choose to convert your term policy to a permanent life insurance plan instead (Whole Life).
At the end of the day, there’s no cap on the amount of life insurance you can have and, when you have either a term or whole life policy in place – be it for yourself, the young adult in your family, or both – you can rest assured that, should the unimaginable happen, you have a solid plan to cover off the financial aspect of life’s most unexpected events. Perhaps life insurance should be the next hot topic in today’s conversations after all!