Why take out life insurance as a young adult [5 key benefits]

Life insurance is often considered as financial protection for the older generation as planning for the future isn’t always in the forefront of your mind during your young adulthood.

Despite this, young adults have caused a surge in life insurance sales as you would be surprised to find out how much does over 50 life insurance cost. Put it this way, it is a lot more than when you are in your youth.

Despite this, young adults have caused a surge in life insurance sales. Throughout 2020 – 2021 the 18 – 34 age group was most active in the life insurance market, resulting in an 18% jump in all policy sales – (Cover magazine)

While the COVID-19 pandemic may have been a driving factor behind these purchases, it can still be very beneficial to take out cover as a young adult even as we start the journey back to normality.

Life insurance – the basics

What is life insurance?

Life insurance is a form of financial protection that will pay out a cash lump sum to your loved ones after your passing.

Your loved ones can use these funds however they see fit, but typically, a life insurance payout is used to cover key financial commitments (such as mortgage/rent payments and family living costs).

You’ll need to pay a monthly premium to keep your cover valid, this is calculated during the application process using information about you (such as your age, smoking status, medical history, occupation etc) as well as your chosen policy (such as policy type, level of cover and length of cover).

There are 4 policy types available to young adults, these include:

• Level term life insurance – your cover will last for a specified period of time and your sum assured (cover amount) will remain fixed throughout this time. Meaning the amount paid out to your loved ones remains the same. This is an ideal option for protecting future assets due to the large payout potential.
• Decreasing term life insurance – you’ll be protected for a specified period of time and your sum assured will reduce throughout the policy lifetime. This option is ideal for young adults who have just bought a home, as your sum assured can decrease in line with your repayment mortgage balance.
• Family income benefit – similar to term life insurance in the sense that your cover will last for a specified period of time. The difference is that your loved ones will receive monthly income payments upon your passing, rather than a lump-sum payment. This is a great option for those with a young family who want to protect their future living costs.
• Whole of life insurance – with this policy type, cover lasts for life. This means that your loved ones are guaranteed a payout. While this sounds ideal, you’ll need to consider that you’ll need to pay premiums for the rest of your life to keep your cover in place which could become very costly if you’re taking out cover at a young age. 

5 benefits of taking out life insurance as a young adult

Below award-winning broker, Reassured, details the 5 key benefits of taking out life insurance as a young adult:

Lock in cheap premiums for years to come

As discussed, the price you pay for life insurance is based on the level of risk you pose to the insurer. As a general rule, the younger you are the less risk you pose (and the cheaper your premiums).

Most life insurance policies come with guaranteed premiums; these are premiums that don’t change over time. So, by taking out life insurance as a young adult, you can secure the most affordable premium to pay over the lifetime of your policy.

Someone in their 20s or early 30s could secure £150,000 of cover from just 20p a day.

Protect your loved ones’ financial future

If you have a young family, your passing would be a great loss emotionally and financially. Having life insurance in place can allow your family to continue their current lifestyle with minimal financial disruption.

A life insurance payout could help to cover the following for your young family:

• Mortgage or rent payments
• Future family living costs
• Additional childcare
• Outstanding debts in your name
• The cost of your funeral

 Safeguard your future assets

As a young adult, the focus is usually on keeping up with day-to-day living costs, so it can be easy to overlook costs you’ll want to protect in the future.  

However, waiting until these life events happen could mean you pay more for your cover – particularly as it’s not uncommon to join the property ladder and start a family later in life.

Term life insurance can last up to 40 years, so by taking out life insurance in young adulthood, you can lock in the lowest premium and protect your future lifestyle – whatever life may bring your way.

It can even be possible to increase your level of cover if your needs change in the future…

Increase your cover amount to meet new circumstances

Some life insurance policies come with what’s known as special events or guaranteed insurability option.

This is a benefit that allows you to increase your level of cover to meet new circumstances, such as buying a house or growing your family, without having to provide any new medical information.

Instead, your new premium will typically be based on your age and level of cover.

For example, you may initially take out cover while you have no dependants to protect any debts/loans (such as credit card bills and/or car finance) you may have. But later in your life you may settle down, get a mortgage and start a family meaning you’ll need a greater level of cover.

The special events option is ideal for young adults to allow the cover to adapt to ever-changing needs, so it’s wise to enquire about this option when taking out life insurance.

Buy life insurance online quickly and easily

It’s now possible to buy life insurance online, through select providers, comparison sites and broker services (such as Reassured).

When buying life insurance online, the process is automated. This means that if any high-risk factors are identified, the application may need to continue over the phone so the insurer can ask further questions and the application can be assessed manually.

This makes the online journey ideal for young adults as you can take advantage of your age (and likely better health) to quickly and easily buy life insurance online.

With many young adults living a fast-paced life, buying can online allow you to take out cover at a time and place that suits you.

In summary

I hope this article has been informative and helpful, but not in any way alarmist.

Not everyone will need life insurance cover, however, if you have dependents who rely on you financially then it could be an affordable option that provides valuable peace of mind – ensuring your loved ones will be provisioned for whatever the future may hold.