Think life insurance is complicated and expensive? We’re here to set the record straight and tell you what you need to know.
Life insurance: it’s one of those things that nobody likes to talk about. This is doubly true for young professionals who are; when you feel on top of the world, your inevitable demise is not exactly top of mind.
However, it’s a sad fact of life that accidents can and do happen, and life insurance can be there to help your loved ones pick up the pieces. It’s a tricky subject for many people, so here are some things you should know about life insurance if you’re getting ready to jump into your career:
Do you need life insurance?
Yes? No? Maybe so?
Most young adults laugh at the idea of life insurance, but there is one simple rule to determining whether or not life insurance is worth it: if you have anyone in your life who will be severely affected financially by your death, then life insurance is a good investment.
This usually means a spouse or children, but consider all angles of your finances. For example, if you’ve amassed a large amount of student loans, a life insurance policy can help protect your parents from being .
What does typical life insurance cover?
For a typical term life policy, the death benefit fully covers the policyholder for any cause of death, including by disease, accident, injury and natural causes.
If you have an ongoing medical condition or enjoy dangerous hobbies, such as extreme sports like skydiving, you’ll want to make sure your policy specifically covers those situations, but generally, a life insurance policy will pay benefits for any form of death.
What does life insurance cost?
A common misconception is that life insurance is more expensive than a law degree. This is a major turnoff for recent graduates and young professionals who may not have the money saved up for large investments.
Luckily, as a young person, you can actually find term life insurance coverage at decent rates. Here are examples for $500,000 worth of coverage for a healthy 25- to 35-year-old male (women’s rates will typically be lower):
- 25-year-old: 25-year term = $26/month; 30-year term = $30/month
- 30-year-old: 25-year term = $28/month; 30-year term = $32/month
- 35-year-old: 25-year term = $34/month; 30-year term = $37/month
These policies provide a lot of coverage for less than most monthly Internet bills. If you don’t need as much coverage for your beneficiaries, the cost will be even lower. It’s also important to realize that your rate will be locked in whenever you buy the policy, even if you become sick in the middle of the term. This makes it even more beneficial to choose a policy while you’re young and healthy.
If I have employer coverage, am I good to go?
Your new job might come with some sweet benefits, but don’t let the glitz and glamour blind you to the fine print. Many employers offer group life insurance policies that you can join for free or for a small fee. It’s easy to stop and think “Well, that’s something I never have to think about again,” but beware!
Employer-based group policies usually don’t provide anywhere close to the coverage that an individual policy will, and they’re more likely to have clauses that stop or limit benefits from being paid. That’s not to say they’re a bad thing; they’re great as a supplemental policy for extra coverage, but it’s usually not wise to rely on group policies for your main form of life insurance.
How should freelancers handle life insurance?
As a , you’re less likely to buy life insurance, especially if you’re just starting out, because you’re avoiding any additional costs. But ignoring important cushions like health or life insurance is a great way to forget about them entirely until it’s too late. Term policies are a lot cheaper than you might think, and you’ll be able to find a company and policy that works for you. For more on life insurance as a freelancer, check out this post on .
Ultimately, you need to decide for yourself whether life insurance is right for you. Taking the time to consider your options now will help protect those you love in the future.
has been an independent life insurance agent for over a decade now, and he prides himself on being able to work with the . He is the founder of ChooseTerm.com and enjoys being able to write in order to help people understand life insurance.