Life Insurance for Young Adults

Life insurance is often a low priority for young adults. In your 20s and 30s, the safety net for those “what if” moments feel best left for that distant space way over the hill and out of sight. When you are single, child-free and in relatively good health, the value can seem virtually non-existent.

Feelings like these stem from a misunderstanding of how life insurance works for young adults. When you establish a life insurance plan early, you can realize significant benefits that will diminish as you age. This article will explore those benefits and who should take advantage of high-value life insurance policies at a young age.

Benefits of Life Insurance For Young Adults

Family Protection

At its most basic, life insurance is thought of as financial security for your spouse and children. This is in the event that you die. Your passing can seriously agitate the financial dynamic of the household, leaving your family in unsustainable circumstances. Life insurance protects against that by giving your loved ones a large financial buoy to pay the bills and stay on track.

What many do not consider is the value of life insurance for covering against debt. As a young adult, you may have student loans or other debts hanging over your head that may have been co-signed. With a life insurance policy, you can protect your beneficiaries from shouldering the burden.

But what if you are unmarried and childless? What is the point of life insurance then?

The death benefits of life insurance are more nuanced than many realize. Benefits can go to anyone named as a beneficiary. This could include parents, siblings or friends.

If you run a business, you can set your life insurance to pay out towards that to keep it operating without disruption. In essence, if there is someone or some entity (it could even be your favorite charity) in your life that is meaningful, you have the ability to leave a positive legacy.

Life Insurance Costs

Anyone with a passing understanding of life insurance knows that companies make their money when they do not need to pay it out. If there is little risk, they make their money no matter how much it costs. However, if you are considered to be at higher risk due to age or poor health, they have a higher chance of seeing a claim and will subsequently charge more.

This means that, for young people, life insurance policies can be extremely affordable. Term life insurance is a great option if you are young, and especially if you are under 30. 

Premiums with term life insurance policies are set at the time that the plan is opened and does not increase over its duration. If you have a longer-term, you can have lower premiums far into older age. Than if you opened a policy after 30.


To illustrate, let’s say you are 27 years old and open a term life policy for 30 years at $15 a month. At 55 years old, you are still paying $15 a month. In contrast, if you open a 20-year policy at 37 years old. Then are paying $30 a month, at age 55 you are still paying $30 a month.

Insurance companies not only look at age but also health, which is generally connected to youth. Opening an insurance policy in your 20s may seem premature but chronic health problems can set in early. If you get on a policy before conditions like high blood pressure, weight gain, and high cholesterol develop, you will lock into a lower rate.

For a young person thinking of a family or just starting a family, getting coverage as soon as possible can save you a lot of money. While ensuring your family is completely protected in the case of an unexpected death.

Even if you still are not thinking that far ahead, you can still get a life insurance policy. Then adjust it as your circumstances change. This partly relies on how you choose your beneficiaries.

If you open a policy with revocable beneficiaries, you can arrange it to make sure your parents will be taken care of if you pass. As you grow older and build your family, you can adjust your policy. This can include your spouse and children as beneficiaries. However, at that point, you would be paying much less in monthly premiums. This is if you waited to start a family.

Living Benefits

Everybody is aware of insurance paying out potentially large sums of money to your beneficiaries if you die. These are death benefits, and they are primarily how insured individuals choose their plans.

What is easily overlooked are all of the living benefits of particular life insurance policies. If you are looking to gain financial benefits from life insurance, a permanent life insurance policy could be a strategic move for a young adult.

Although federal law prohibits the use of cash value as a selling point for insurance companies, it is still the major living benefit of permanent policies like whole and universal life insurance. 

In these permanent policies, the policyholder pays into their plan each month, a percentage is held to accrue interest. These funds can later be used to pay for college tuition. Also making a down payment on a home, vacations, weddings, or just about anything you want. The growth of the cash value is also tax-deferred, so more money stays in and the return increases.

There are several types of permanent life insurance policies to consider. And they will generally cost much more than term policies, even for young adults. Still, depending on your goals, they may make the most sense as an investment and can grow with good funding. 

Even less expensive plans that bear lower interest can net a substantial amount if taken long-term. As part of a retirement plan, these insurance policies can supplement other investments like maxed-out IRAs. The downside to cash value is that it may not be included in the payout to beneficiaries upon your death and instead stays with the insurer.

When Should You Invest in Life Insurance?

The right time to purchase a policy is dependent on your current situation and life goals. Although they carry their unique benefits, not all plans make sense for young adults. The following are situations in which it would be practical to purchase a life insurance policy before you turn 30:

If you have parents who cosigned on loans

If you are only a few years removed from college, it’s likely that there is still a large amount of student loan debt over your head. As a co-signer on your loan, your parent or guardian will be responsible for paying off that debt if you pass away. Car loans and other normal financed purchases will also move over to the next available debtor.

Carrying a term life insurance policy for 10-20 years can align with your payoff scheduled to ensure cosigners are protected from unexpected and unmanageable debt. With small coverage amounts around $50,000 at a young age, monthly premiums often only amount to a few dollars a month.

If you are planning to have children and want to lock in low rates

As mentioned, purchase a term life or permanent policy early holds financial advantages. If you plan to have children in the future, either policy can benefit you down the line. 

A term life insurance policy will have lower premiums over its 10, 20, 30, or even 40-year span if started when you are young and healthy. Meanwhile, a permanent policy may not save you money initially. This in regards to premiums but it gives more time for your pay-ins to generate cash value. This can set you to potentially pay for your children’s college or family vacations.

You do not have to wait on a wife, husband, or children to have someone — or something — to care for. Friends, partners, parents, or anyone that could benefit can be named beneficiaries. 

If you own a business, you become an insurable interest for your employees and the state of the company. Business loans are often treated like student loans, passing onto another person if you die with outstanding debt. Taking out a policy on yourself can maintain the business’s function without dipping into its assets if you pass unexpectedly.

You want to cover final expenses

Funerals have always been expensive and costs continue to rise. Taking out a small policy can keep your family and friends from covering final burial and cremation costs.

Start Planning with NextGen Life Insurance

As an investment strategy or cost-effective coverage for your loved ones, getting life insurance early is highly beneficial. NextGen Life Insurance is your partner in finding the life insurance plan that meets your financial needs and accomplishes your long-term goals. 

If you are a young adult interested in exploring the rich opportunities that life insurance can afford, our experts will work to maximize your benefits. Get your free quote today or call us at 646-216-4199 to get started.