What is life insurance and how can having a policy help you?
The purest definition of life insurance: If an individual dies, a term life, whole life or return of premium insurance policy will provide income-tax free dollars to that individual’s (insured) beneficiary(ies) which can be people he or she loves and wants to take care of.
However, if you are single you may have very few debts, school debts being one of them, and no one is financially dependent on you, right? Can you just wait to purchase life insurance until later in life? Why wouldn’t a young adult wait until he or she gets a mortgage, accumulates additional debts, gets married and starts a family?
Reasons to consider purchasing life insurance as a young adult:
- Typically, a young adult is in the best physical health condition of their life and will qualify for the best rates and be able to lock those rates in for the remainder of their life.
- Once you purchase life insurance you are guaranteed, regardless of your future health, the premium will never change.
- If a single young adult purchases term insurance, that specific premium is inexpensive and provides the insured the guaranteed option that he or she can exchange to a whole, or permanent, life insurance policy regardless of his or her future health status.
- The advantage of whole, or permanent, life insurance is that it provides the young, single adult with living benefits and cash value accumulation.
- Term life insurance - provides benefits and value only in the event of death
- Whole life insurance - can provide living benefits to the insured while living and death benefit to his or her beneficiary(ies).
- There is a guaranteed insurability rider that can be included in a policy that provides the insured the option to purchase additional life insurance as many as six times throughout their lifetime at the same underwriting classification as initially purchased… no medical exam will be required
The cost of life insurance increases as an individual gets older… purchase your policy at age 25 or 38, here is the difference in premium for $500,000
- Age 25 = $700 annually or $60.90/month
- Age 38 = $1,495 annually or $130.07/ month
- In this example, the policy’s premium is guaranteed for 30 years. However, which premium seems to make the most sense?
Why does a single adult need a life insurance policy?
The classic definition of why an individual needs life insurance is, “replacement of an income so his or her loved one(s) can continue to remain in a similar financial lifestyle.” There is no immediate “need” to purchase or have life insurance, but there are many benefits from purchasing a policy earlier in life.
Living benefits of life insurance and guaranteed cash accumulation
When designed properly, this insurance provides living benefits for the insured, we call it life insurance for a reason, let’s emphasize and highlight the individual living benefits a policy like this can offer.
When you include the living benefits of whole life insurance, it provides the option of becoming the beneficiary of one’s own policy!
- The earlier one purchases life insurance the less expensive it will be.
- The more cash value it will accumulate to supplement retirement income.
- It has also been designed to provide income if the insured becomes chronically ill.
- If the insured is diagnosed with a terminal illness with a life expectancy of less than 12 months, almost all of the death benefit will be accelerated and given to the insured so he or she can utilize the tax-free dollars when and how they need to.
- The secondary benefit becomes the death benefit for the beneficiary(ies), the primary benefit has now been designed for the insured.
As a single adult, how much coverage do you need to be confident in your policy?
Calculate how much coverage you need on the life insurance calculator. When determining how much coverage you, a young single adult needs, the conversations should center on the following:
- What are your future goals and aspirations?
- Where do you see yourself in 3,5,10 years?
- What is important to you in life?
Statistics indicate that of individuals born between 1983 – 1994, 43% plan to leave their current jobs within two years, only 28% have plans to stay beyond five years. This will impact the individual group benefits and savings; one must incorporate the impact of job transitions into their long-term planning strategy.
What are the benefits of a life insurance policy?
Most people understand that life insurance provides income in the event of death; however, what most young singles are not aware of is how it can help while they are alive.
The concept of purchasing insurance to protect the individual’s future spouse and children is noble, but what is in it for you? Let’s concentrate on how it can benefit you if you don’t unexpectedly or prematurely die. An insured can determine when and how he or she wants to, or needs to, use their policy.
Life insurance can assist an individual in paying off their mortgage early
Being able to pay off your mortgage early could possibly save you thousands of dollars in interest payments. Turn a 30-year mortgage into a 24-year mortgage and payoff by utilizing the insurance policy while you are alive.
Provide income-tax free dollars to supplement retirement income
Whole life insurance is owned by the individual; it can never be taken away. It accumulates cash to supplement income later in life regardless of how many times you may change jobs.
Whole life insurance death benefits can be accelerated while you are living to pay for chronic illness expenses later in life
Statistics illustrate that 63% of individuals age 65 or older have two or more chronic conditions… it can be used to offset chronic illness expenses.1
What about a terminal illness
If you are diagnosed with a terminal illness your life policies’ death benefit can also be accelerated to you income tax free, when you need it most.
We call it life insurance for a reason
Concentrate on the living benefits for yourself knowing that in the event of a premature death there will be income available for your beneficiaries.
What are your next steps in this process?
First, you will want to contact your Indiana Farm Bureau Insurance agent or find an agent online to talk to. They will help you understand what you have and help determine which life insurance policy is right for you and your unique needs.
Our goal is for you to figure out what is important to you. A conversation with your agent about your goals will help you achieve this. No matter if you want to replace personal income, pay off debt or provide college education, your agent can help you establish those personal goals.
Once you are done identifying your overall goals, your agent will help select a life insurance policy that is right for you. We understand that we are insuring your present and your future!
Were all of your questions answered about life insurance? Then it is time to get a quote and explore all of the benefits of a life insurance policy for you and your beneficiaries.
1. Centers for Disease Control and Prevention. Leading causes of death and numbers of deaths, by sex, race, and Hispanic origin: United States, 1980 and 2014 (Table 19). Health, United States, 2015. https://www.cdc.gov/nchs/data/hus/.
*The information in this article was compiled from a variety of sources and is intended to provide helpful tips only.