Buy Life Early

The Millennial generation (people born between 1977 and 1995) is putting off traditional milestone events to a later point in their lives than preceding generations—buying a first home, getting married or starting families. It’s due in part to Millennials growing up during the Great Recession of 2009.

According to a Pew Research Center study, only one in three Millennials even head up their own household, down from 35 percent at the time of the Great Recession. Their generation faces higher unemployment and often lower incomes.

That has led many Millennials to also delay buying life insurance. “I see it in many of my younger clients—they struggle with the concept of illness or mortality in their near future,” said Al Schor, field director with Northwestern Mutual. And it makes sense, since the primary reason people buy life insurance is for the death benefit. If they don’t have anyone depending on them, why do they need that protection now?

But, Schor points out, there are other factors to consider when deciding when to buy life insurance. “What they need to realize is that it’s not just about a death benefit or protecting loved ones. It’s an integral part of a successful and balanced strategic financial plan.” He works with a number of young single clients who have seen the value of buying life insurance now. “They understand the value of being able to lock in premiums and death benefit now. And with whole life insurance they’re building guaranteed cash value.”

Most permanent life insurance builds cash value and can become an important, stable part of your financial plan—which is exactly what Millennials say they want, according to the Northwestern Mutual study “Millennials’ Approach to Money Management.” Thirty percent of participants say they prefer a “slow and steady” approach to investing. The sooner someone buys permanent life insurance, the sooner they start building that cash value, which can be accessed for opportunities or emergencies.1 Eventually, if the death benefit is no longer needed, the cash value can be used to supplement retirement.

In addition, something most Millennials likely don’t think about is the concept of insurability. The cost of life insurance depends on many factors, including the type of policy, the death benefit amount, age and health at the time someone takes out a policy. By buying life insurance at a young age, it ensures that if something happens to someone’s health in the future, that person’s rates will always be based on his or her health at the time the policy was purchased. In addition, some policies can be designed to allow the purchase of additional insurance in the future at rates based on someone’s health at the time he or she originally bought the policy. That can be a big advantage if that person was to develop a health issue like diabetes.

It’s easy to see why a young person might think life insurance doesn’t make sense. But Schor reminds his clients, “Think of how much [their] lives have changed in the last five years. They’ve graduated college or started a career. They can’t presume to know exactly what’s going to, or not going to, happen in the next five years. They just need to establish short- and long-term goals and come up with the best plan on how to achieve them.”