If you’re in your 20’s, you might be wondering if you should consider buying life insurance and how much it costs.
Perhaps you also need a bit of help determining how much coverage you need and which type to buy, term or permanent.
We’ve got you covered!
I actually purchased my first policy at 27 years old and have since helped thousands of individuals in their twenties to find the perfect coverage for their needs. In this article, I’ll share my story about buying my first policy, along with everything else you need to know.
So let’s jump in!
Table of Contents:
Why You Need Life Insurance in Your 20’s
You’re probably reading this article and wondering why you should bother to think about life insurance at this point in your life? Death isn’t even a consideration.
…but this is exactly the time in your life when you should be looking to buy life insurance!
Here’s the #1 reason:
You’re young and healthy, so life insurance is dirt cheap!
But why do you need it?
If you are married or are thinking about having a family, ultimately you will realize that life insurance is an absolute necessity when it comes to providing an adequate financial safety net for those you love.
When you sit down and do the numbers, it actually makes a lot of sense to buy life insurance when it’s most affordable.
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There are some very good reasons you should consider buying term life insurance in your 20’s. Remember, life changes exponentially over 3 decades, so it is very important to plan for your future, not your current circumstances. Life insurance is for you if you are planning to:
- Get Married: Are you planning to get married in your 20’s or early 30’s? If you take on debt such as mortgage, credit cards, a car payment or have outstanding student loans you could really leave your partner in a financial mess if you die suddenly. These obligations don’t just go away – they have to be satisfied and your spouse may not be in a situation where they can cover everything.
- Have Children: Children are a huge responsibility and they rely on you to provide for them. If you intend to have a family life insurance is so very important.
- Incur Business Obligations: Do you have a business? If you want to make sure that the financial obligations of the business are covered should something unforeseen happen, a life insurance policy may be just what you need.
- Cosigned Student Loans: Did your parents cosign the loan for your expensive ivy league university? You may want to consider a life insurance policy that will help them cover the debt should you die.
In the long run, a little planning can save you thousands of dollars. Mortgages, marriages, children, business obligations and debt are undoubtedly in your future.
My First Life Insurance Policy (Purchased at Age 27)
Two years after I married my wife, I started making some pretty decent money working part-time as an insurance agent and part-time in the family janitorial business.
My wife, Brenda, was 26 at the time and worked as a full-time Registered Dental Assistant. She made some really good money, but we had a condo, some student loan and credit card debt, and a couple of cars.
We weren’t even thinking about having children at the time, but I was still concerned if something happened to me, she would have have a hard time paying all the bills.
I was still a very new life insurance agent, but I knew enough to look at my situation and realize I needed some term life insurance.
I applied for a 30 year term for $500,000 of coverage with Banner Life Insurance. $500k was about 10x my income.
I honestly wasn’t sure how much to buy but I figured:
- I can always buy more later
- $500k would pay off all our bills and then some
- It’s all I can afford!
As for the 30 year term, my reasoning at the time was I would be working for at least 30 years so I needed protection that long.
All I needed to do was get approved.
But all did NOT go according to plan…
It was only supposed to cost me $22 per month but in my medical exam, Banner discovered I had really, really high cholesterol. It was actually great to learn this because I “looked” fit, felt great, and had no idea that I had dangerously high cholesterol.
Luckily, it wasn’t bad enought to get declined for coverage outright, but I got penalized heavily and ended up paying $27 per month instead. I took the coverage, worked on my health for the next year, and ended up replacing that policy for a cheaper one once I reduced my cholesterol.
A few things you can learn from my first purchase:
- Consider starting with a “no exam” policy: I got burned because I took a medical exam. I would have paid a lot less if I got a policy that did not require an exam. I recoomend Haven Life for 10 to 30 year term coverage. Click here for a free quote.
- Don’t pannick over the amount of coverage: You can use this article to help determine how much life insurance you need, but don’t worry about getting the amount just right. The important thing is pulling the trigger.
- Buy what you can afford: If all you can afford is $100,000 for a 10 year term, that’s fine. You can always add on more later and something is certainly better than nothing!
How Much Does Term Insurance Cost? Two Case Studies
Term life insurance is the most inexpensive life insurance policy out there and this is especially true for those who are between the ages of 20 – 29.
As you grow older, life insurance increases in price because you are getting closer to the end of your life. In fact, if you wait until your later years, term life insurance may become unaffordable.
Life Insurance underwriters know the odds are in their favor that you will survive until the end of a 30-year term issued at this point and chances are they won’t have to pay out during your lifetime. This results in very affordable premiums being offered by life insurance companies throughout your 20’s.
Most people buy term life insurance hoping they will outlive their policy. The coverage is only there to provide protection for your loved ones in case of a tragedy.
Why not buy a policy when you are able to qualify for the best possible rates to cover you during your most important money making years?
Take a look at the following examples:
Case Study 1: $500,000 Coverage
- A 29 year old non-smoking male looking for 500K in coverage for 30 years
- His premium will cost approximately $43.00 per month
*Compare these numbers to:
- A 39 year old non-smoking male looking for 500K in coverage for 30 years
- His premium will cost approximately $62.00 per month
*The savings if you buy a policy at 29 is
Case Study 2: $1 Million Coverage
- A 22 year old non-smoking male looking for $1 Million in coverage for 30 years
- His premium will cost approximately $55.00 per month
*Compare these numbers to:
- A 42 year old non-smoking male looking for $1Million in coverage for 30 years
- His premium will cost approximately $146.00 per month
*The savings if you buy a policy at 29 is
These savings figures would be even higher if the 39 or 42 year olds had some pre-existing medical issues. The most important thing to remember is, if you have your family young, the coverage would protect you through the most vulnerable years. Chances are, by the age of 52 or 59 your kids will be out of the house and you should have a sizeable nest egg. Life insurance may no longer be necessary.
Sample Term Life Insurance Quotes for Young Adults
To give you some cold, hard numbers to work with, I ran quotes for a 30-year term for male non-smokers from 20 – 29 years of age with a preferred rating.
So these aren’t even the best quotes you could obtain if you qualify for a Preferred Plus classification!
These figures will give you some insight into how rates change with age, term length and coverage.
As you can see, there is virtually no difference in cost for a 21 year old male non-smoker and a 26 year old male non-smoker to purchase a $100,000 policy for a 10-year term. From the perspective of a life insurance company, this policy is a great bet because he will be insured for a very short period of time while he is in the prime of his life and to top it off the benefits that would be paid out are relatively low.
So it makes sense that the cost would not be as steady if you compare a 23 year old male non-smoker looking for $1Million in coverage for 30 years to a 28 year old male non-smoker seeking the same term and benefits. The 23-year-old would pay $58.29 per month and the 28-year-old would pay $74.82 per month!
Over a period of 30 years these numbers really start to add up – that’s nearly a $6000.00 increase over the policy term and these figures continue to escalate as you grow older.
Take a moment to peruse the numbers and you will notice how incredibly affordable a 30-year term is in your 20’s!
Term Life Insurance Quotes at 20-29 Years Old
|20 Year Old Male||$14.17||$23.01||$30.45||$54.81|
|21 Year Old Male||$14.17||$23.01||$30.89||$55.68|
|22 Year Old Male||$14.17||$23.01||$31.32||$56.55|
|23 Year Old Male||$14.17||$23.01||$32.19||$58.29|
|24 Year Old Male||$14.17||$23.01||$33.50||$60.90|
|25 Year Old Male||$14.17||$23.01||$34.80||$63.51|
|26 Year Old Male||$14.17||$23.22||$36.54||$66.99|
|27 Year Old Male||$14.26||$23.44||$38.28||$70.47|
|28 Year Old Male||$14.26||$24.20||$40.46||$74.82|
|29 Year Old Male||$14.35||$24.42||$42.68||$77.88|
*Updated for 2020 – Monthly rates based on a male, in excellent health, non smoker for 30 year guaranteed level term. Rates change often and differ based on your personal health, family health history, & state of residence. Click here for correct rates based on your situation.
Term Insurance – Why Your Rating Matters
The rating you are assigned makes a huge impact on the premiums you pay. One of the main reasons we urge people in their 20’s to consider their life insurance needs, is because they are young, healthy and easily qualify for the top classifications.
If you wait until your later years to get insured, chances are some health issues could crop up that will cost you a lot of dough in the long run.
Family history also affects which classification you will be assigned by an underwriter. But BEWARE – not all companies treat people the same. We know which are more lenient and how to find the insurance company that will best suit your needs.
Case Study 1:
- 25 year old non-smoking male, 500K in coverage with a 30 year term – Preferred Plus rating.
- $32.00 per month
Case Study 2:
- 25 year old non-smoking male, 500K in coverage with a 30 year term – Preferred rating
- $41.oo per month
Case Study 3:
- 25 year old non-smoking male, 500K in coverage with a 30 year term – Standard rating
- $65.00 per month
Case Study 4:
- 25 year old smoking male, 500K in coverage with a 30 year term – Standard rating
- $134.00 per month!
Wow! Now take a look at the differences when it comes to premiums. A smoker with a standard rating will pay a staggering $36,720 more to hold life insurance over a 30 year term than his non-smoking counterpart who qualified for a preferred plus rating.
The numbers don’t lie. Maintaining your health and non-smoking status save you LOTS of money.
Age Matters – Especially When You Are Looking for $1 Million in Coverage!
Case Study 1:
- 22 year old non-smoking male, $1 Million in coverage with a 30 year term – Preferred rating
- $56.00 per month
Case Study 2:
- 24 year old non-smoking male, $1 Million in coverage with a 30 year term – Preferred rating
- $61.00 per month
Case Study 3:
- 22 year old non-smoking male, $1 Million in coverage with a 30 year term – Preferred rating
- $78.00 per month
As you can see there is very little difference between the premiums for the 22 year old and 24 year old – but when you hit 29 and you are talking about $1 Million in coverage the cost shoots up. The 29 year old will pay about $7920.00 more than the 22 year old over the course of the 30 year term. That’s quite a bit of money.
Adding up the Numbers
Buying life insurance is a balancing act. Too little can set your family into a financial tailspin if you die suddenly and too much can be a waste of your hard earned cash…money that could be better invested elsewhere.
If you are in your 20’s, you’re probably buying life insurance for income replacement later in life. So you need to be very honest about what you think your needs are going to be over the coming decades.
To find that “sweet spot” for buying the right amount of life insurance to meet the needs of your family, use our LIFE INSURANCE NEEDS CALCULATOR to help you decide!
We also have a Wise Investment Calculator that can help you compute your IRR (Internal Rate of Return). You might be surprised to see how much you would have to invest to leave your beneficiaries 500K. Click the button below to check it out.
What If My Employer Offers Life Insurance?
Employers may offer benefits as an incentive to work for their company. This may actually be one of your deciding factors when accepting a job offer, but be sure to do your homework if you are considering a life insurance policy offered through work.
If life insurance is fully covered by your employer, it’s a no brainer…take it!
On the other hand, if you have to pay for the policy yourself, chances are you could get better coverage at a lower price by consulting an independent life insurance agent such as Huntley Wealth.
Issues of Portability
It’s extraordinarily unlikely that you will stay with your current employer until the end of your career and issues of portability will come up if you decide to quit, are fired or retire. Too many people don’t consider this when they accept life insurance through work.
It’s really difficult to imagine leaving a job when you are in your 20’s. Especially if it’s your dream job with benefits, but in today’s world it’s unlikely you will stay in the same position for 10 years not to mention 30.
One study stated that a staggering 77% of companies expect to retain college graduates for less than 1 year and a Career Builder survey showed that 45% of all employees expect to be with their employer for less than 2 years. In a nutshell, these findings should give you a heads up that you need to find out if the life insurance you are paying into will follow you when you leave.
If you are young and in good health, you can likely buy private individual life insurance cheaper than getting it through your employer. That is, unless your employer-sponsored insurance is free. If it is, take it. Investopedia, Young & Healthy? Don’t Buy Life Insurance from Your Employer
A Lot Can Change in 30 Years!
It’s tough to imagine just how much your life will change in 30 years when you’re footloose and fancy-free.
In your 20’s, you may be working towards your career goals and the only obligations you have are rent and going out with your friends. Life insurance doesn’t seem necessary at this point.
The key to saving thousands of dollars is to proactively plan for your financial future. Houses, marriage, children, and businesses come with huge responsibilities.
Ultimately it will be up to you to ensure that your family and loved ones are not saddled with a mess should you die unexpectedly.
Life Insurance Protects Your Loved Ones from Loss of an Income
Should the unimaginable happen and you pass away, your beneficiary(s) will receive a lump sum payment that they can use any way they need upon your demise. Bills and mortgage payments don’t stop when one of the breadwinners die, but you can rest easy knowing these obligations are covered if you have life insurance in place.
No one stays young and healthy forever. I am going to illustrate how purchasing coverage in your 20’s can save you money into your late 50’s.
Let’s use an example of a 28 year old male non-smoker who decides to buy $500,000 in coverage for a 30 year term. This gentleman gets married at 32 and has 2 children at 35 and 37.
By the end of his term, he should have substantial savings in the bank and is children will be 23 and 21 respectively, which means his family was protected throughout their upbringing and most of college. Our client, who is now 58 years old, probably doesn’t need $500,000 in life insurance coverage and would be better served by a small policy that covers funeral costs.
Remember life insurance exists primarily to protect you and your loved ones for most of your career. If you can lock in a low premium early on, you will save thousands.
What About Taxes?
This is one of the best sales points of life insurance. Your beneficiary(s) will receive the money completely tax-free should anything happen to you during the term.
There are of course exceptions to the rule.
One of them being if the benefits become part of your estate and the estate is sizeable enough the proceeds may become taxable.
The good news is, this is never the case for your spouse.
If you feel this may be an issue for you, the best thing to do is contact a financial planner to go through your options.
NOTE: Permanent life insurance is very different as it offers a cash value accumulation feature, so taxation may not be as straightforward in regard to that. We are concentrating on term here.
The Benefits of Term Life Insurance
No one likes to think about a tragedy, but unfortunately, it’s part of life.
Let’s say you’re in your 20s and have a young child, with another one on the way in a few months.
You’re stretched financially because your mortgage payments are costly, you financed your car and you have substantial credit card debt.
On your way to work your car is broadsided by a truck and you are killed on impact.
You were the main breadwinner of the family, and now all of a sudden, that income is gone!
How is your pregnant partner going to pay for the funeral expenses, the mortgage, raise the kids and find the cash to look after loans, credit cards and the bills? Any savings you had will evaporate in the blink of an eye, if only you had purchased a term life insurance policy this nightmare wouldn’t be so bleak.
If you had purchased a term policy at 23, knowing you were going to get married that year, everything would be different.
Unfortunately far too many people overestimate the cost of life insurance.
A 23 year old male, non-smoker in good health (preferred rating) would pay about $40.00 per month for 500K in coverage for 30 years. That’s less than $1.40 per day!
Very few people consider just how vulnerable their personal finances are to death. Don’t wait until it’s too late, the perfect solution is right in front of you.
Buy a term life insurance policy when you are young and healthy and it will give you the protection you need from financial devastation later in life.
Gives you something to think about, doesn’t it?
Save Up to 73% On Term Life Insurance
Unfortunately far too many people think that a pre-existing medical condition will result in unaffordable premiums or worse yet being declined altogether.
It all depends on the disability or illness you have and how it is being treated and/or controlled.
The most important thing to keep in mind is that not all insurance companies approach underwriting the same way, some are much more lenient than others. Even if you’re seriously ill, there is always something available for your unique circumstances.
I specialize in health-related issues, so you’re best bet is to give me a call so we can discuss your particular situation. We have been able to provide solutions for people who thought they were otherwise uninsurable.
The best thing you can do right now is pick up the phone and call us 888-603-2876.
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- No Medical Exam
- Coverage Effective in 24 hours, on average
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- Immediate Decision upon Approval
*Note: Along with convenience comes a premium. No exam policies cost approximately 10%-20% more than exam policies. For the absolute lowest price on life insurance, see below.
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If you are in great health, want rock bottom prices but still want the convenience of applying online use this link:
- You won’t have to speak with an agent
- A medical exam is required
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If you have any questions, call us at 888-603-2876, and we’ll be happy to help.*While we make every effort to keep our site updated, please be aware that "timely" information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Huntley Wealth & Insurance Services and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.