From the April 2016 issue

Why Young People Need Life Insurance

Many young adults don't consider their life insurance needs during their late 20s and early 30s. Find out why this can be a costly mistake.

The world is your oyster when you’re young. You can wake up each day knowing most of the adventures you’ll have in life are still ahead of you.

While you’re finishing graduate school, buying your first home, getting married or starting a family, purchasing life insurance is probably the last thing on your mind. But that thinking is a common mistake – and often a costly one.

“As a young adult myself it’s not something that we think about,” says Sara Hampton, senior marketing associate at Michigan Term, a Troy-based life insurance brokerage that caters to families. “We’re young, we’re not dying tomorrow. It’s sort of out of sight, out of mind for us at this stage.”

But eventually it’s not so ‘out of sight’ anymore. Many people start thinking about life insurance when they’re older and have more experience with people they know dying. Seeing how this affects a family – especially if the person had no life insurance – can be a painful reminder of why you really need it.

“Unfortunately it’s not until you really experience something like that – a lack of having life insurance or maybe a benefit of having it – that you start to think ‘Wow, do I need that?'” Hampton says. “Young people might even just think that they can’t afford it. The reality of the situation is it’s very affordable.”

If you wait until your 40s or later, though, rates could be much higher.

“Life insurance, as a general rule, is never going to be cheaper than it is today,” Hampton says. “It’s based on your age and health. You’re healthy today, you’re not necessarily going to be healthy tomorrow.”

Consider this example: A 30-year-old non-smoking female in excellent health could pay as little as $13 per month for a $500,000 10-year term policy. A 20-year policy for the same woman would be just $18 per month.

“At this rate, she could easily afford even double the protection,” Hampton says.

Locking in a low cost is only one small factor. Young people usually start to take on financial responsibilities like car payments, student loan debt or a mortgage – all things that life insurance could pay for in the event of your death, in addition to burial expenses.

“You have financial obligations like debts that you want to make sure are taken care of. If you die tomorrow, who’s going to pay those debts?” Hampton says. “Once you become married your debt becomes your spouse’s debt.”

Newlyweds should also keep in mind that they might be making long-term financial decisions about car payments or housing expenses based on two incomes. If you both planned to retire at 65 but one spouse passes away at 30, “that’s 35 years of income that you’re losing,” Hampton says.

“That’s income that’s being lost for your family, your spouse or your children,” she says.

There are even more costs to consider when you have young kids, such as child care expenses – and it’s still just as necessary for stay-at-home parents since little ones would need full-time child care instead.

Shopping for life insurance can seem overwhelming, but the process is surprisingly simple. The first step is to work with a reputable agency like Michigan Term, where a local agent can talk you through the steps and you’ll get to compare quotes from big-name companies like Nationwide and MetLife.

The right life insurance option will be different for everyone. Term life policies typically offer the “best bang for your buck,” while permanent policies are more costly but offer a guaranteed benefit and sometimes have cash value. For some people, a combination of both is best.

“There are ways that you can work with us to basically pad the coverage to be the best that you need it to be,” Hampton explains. “You can ladder those two different types of policies to give you the most benefit for the least amount of money.”

Michigan Term offers a unique “sold locally online” approach that gives customers fast and free online quotes and the benefit of a local agent to answer your questions.

“Family protection is key here,” Hampton says. “It’s not something you want to think about, but it’s something you need to. It protects your spouse and your children.”

For more information, visit Michigan Term online or call 888-242-9644.

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