Insurance and Finance

Young Professional’s Guide to Life Insurance

By Jennifer Chappell-Smith 9.1.17

OK, young professionals. You’re living in the moment, starting out on your careers and enjoying life’s adventures. You’re not ready to start a family yet, and life insurance seems like something that you won’t need until way down the line. Maybe years from now, when you have more financial assets or a growing family to protect. Even if you do have young kids, you’re young and healthy. Right?

But here’s the thing. Next time you’re seizing the moment when thinking about skydiving or debating going out on that first date, consider that you do only live once — and that’s why life insurance is all the more important to consider while you’re young. 

If you take some time to think about it now, at the start of your career, you’ll reap all kinds of rewards — including financial security for your loved ones. And who doesn’t love not worrying about money? 

So, What Is Life Insurance?

Basically, it’s an agreement with an insurance company that you’ll pay a regular fee (called a premium) in exchange for guaranteed funds (a death benefit) that will be paid to beneficiaries whom you select, in the event of your death. You can name your parents, a cousin, even a best friend or partner as the beneficiary — or of course your children (dependents) if you have them.

What Does It Offer?

Beyond the death benefit, which beneficiaries can use to pay funeral expenses, resolve outstanding debts, and maintain their lifestyle after you’re gone, life insurance offers peace of mind. It gives loved ones a measure of security.

Even for young couples with no children, life insurance can provide a spouse with a leg up on retirement savings should one of you die prematurely. If tragedy happens, you won’t get to contribute to that 401(k) that you and your spouse were planning to build over a career. Life insurance can provide your spouse or partner with a head start on retirement savings — it’s a gift that can secure your partner’s future.

How Does It Work?

To determine your premium, an insurance company will get a little personal. They’ll need to know about your health and lifestyle to determine how much of a risk you represent. Not fun to think about, but some are more likely to die than others. Experts called actuaries study all the data and come up with actuarial tables that help determine risk for someone like you, someone with your medical history, who travels where you travel, who participates in hobbies you like. (Hint: Skydiving regularly won’t help your rates go down.)

Luckily for young professionals, for most healthy twenty-somethings, a life insurance premium will never be cheaper. People in their 20s are generally less of a risk than someone in their 30s or 40s seeking insurance for the first time. That’s why it can be smart to lock in life insurance rates now, before you face potential illnesses or unforeseen complications later in life. 

What Are My Options?

1. You can get Term Life insurance. You sign up for coverage over a certain period of time — say 10, 20, or 30 years. It’s the more affordable option. 

2. You can get Permanent, or Whole Life, Insurance. This type of coverage allows you, the insured, to use your insurance as a savings account, building cash value that you can actually withdraw, if needed, during your lifetime. It typically requires a higher premium payment.

How Much Life Insurance Do I Need?

Online calculators run by the nonprofit educational group Life Happens can help you determine how much of a death benefit would help your loved ones. Factors such as whether you’re responsible for a sibling with special needs, aging parents, or a family of your own, along with your debt load and lifestyle, will come into play.

How Does Life Insurance Fit in With My Overall Financial Plan?

Paying off debt and building emergency funds are components of a financial plan that every young adult should tackle. Life Happens defines financial security as “a combination of insurance protection, and savings and investments that accumulate over time.” Time. It’s the component to think about when it comes to your loved ones’ financial security. We all have a limited amount of time — and we can’t predict how much. That’s why considering life insurance now can be one of the smartest things you do to ensure your loved ones are protected.

So, if you’re a young professional and you’re not sure if life insurance is for you, talk to your Texas Farm Bureau Insurance Agent about how it could benefit the people you love. 

Coverage and discounts are subject to qualifications and policy terms and may vary by situation. Life insurance products are offered through Southern Farm Bureau Life Insurance Company. 

© 2017 Texas Farm Bureau Insurance