Life Insurance for Young Adults

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Life insurance isn’t as interesting as your latest Netflix binge or as cute as Baby Yoda, but it is actually relevant for young adults.

If you’re in your 20s, now may be the perfect time to purchase a life insurance policy.

Premium prices will be lower the younger and healthier you are. Each year that passes, the rate you’d lock in climbs a little higher.

It may seem that life insurance isn’t an essential purchase, but a policy could provide financial protection for you and any dependents you may have — or any dependents you anticipate having if you’re thinking about starting a family.

It may be worth cutting back on a few lattes a month so you can budget for a policy.

Why Young Adults Don’t Buy Life Insurance

Most young adults are finishing their education or just starting their careers — at the beginning of their earning years. In this stage, when every penny counts, it is totally understandable to avoid extra expenses.

Old age and death seem light-years away, and saving for that dream apartment or home is very important.

But for young adults, now is also the perfect time to stretch those “adulting” muscles and start long-term planning for your future.

Student Loan Debt and Life Insurance

If you’re like most young adults, you have a lot of student loan debt. According to, the average graduate walks across the stage with a diploma — and a $38,000 student loan balance to pay off.

Grad students accrue $71,000 in debt on average, and as a nation, borrowers carried more $1.4 trillion dollars in student loan debt in 2019.

If you have private student loans, your family members would need to pay them off if you died unexpectedly. And if you had a co-signer on your loans, that well-meaning soul might have to pay off your balance.

But if you had a life insurance policy in force, your policy’s death benefit could pay off your student loan debts should you suddenly pass away, which means your family wouldn’t have to come up with the money.

How Much Is Life Insurance for Young Adults?

Young adults also have the misconception that life insurance is ridiculously expensive. Because of this, a lot of young adults don’t have the coverage they need and miss out on locking in low costs for the next one to three decades.

So, how can you decide if life insurance is a legitimate expense?

Life insurance works around this general principle: The younger and healthier you are, the cheaper premium rates you can lock-in.

When you lock in a rate, you can keep it the rest of your life or, in most cases, for a specific period of time which can lead to huge savings long-term. We’ll get into that more below.

Premiums Increase As You Age

It is definitely better to get coverage now rather than later as premiums increase 8 to 10 percent each year.

For example, a young female in good health can get a policy for about $20 a month while a 60-year-old female would pay over $120 a month for the same amount of coverage.

The New York Life Insurance Gap Survey of 2018 analyzed the disparity between coverage acquired versus coverage needed across several generations. When looking at Baby Boomers, Gen Xers, and Millennials, they found a societal shift from saving to debtors.

Only ten percent of Millennials have enough life insurance coverage. There is a 78 percent shortfall between what they have versus what they need. According to this study, the average Millennial needs around $500,000 in coverage, but most have just 22 percent, if any, of that $500,000.

What Impacts the Price of Life Insurance?

Keeping these statistics in mind, purchasing a life insurance policy as a young adult is very advantageous.

And age is not the only factor that determines premium rates. Your health and other risk factors will have a huge impact, too.

Life insurance companies have several different levels of health classifications ranging from great to poor, depending on any medical diagnoses. Lifestyle and health choices also weigh in on your health determination.

Here are a few factors that may affect your premium prices at a younger age:

  • Chronic Illnesses: Cancer, diabetes, COPD, for example, affect rates.
  • All Nicotine Use: Cigarettes, dip, chew, and even vaping can inflate rates significantly.
  • Risky Hobbies: Deep sea diving or skydiving, for example.
  • Drug Use: This includes marijuana.

Even if you developed a chronic health condition after locking in a life insurance rate, you could keep your lower rate for the rest of your policy. That’s the beauty of buying a policy early.

Why Young Adults Need Life Insurance?

Okay, let’s be honest. Planning and paying for life insurance isn’t the most thrilling subject.

However, we’ve compiled a list of some of the more common reasons young adults need a life insurance policy. Maybe one or more of these examples will resonate with you:

  • Private Student Loans or Other Private Loans: We talked about the average amount of loans college grads accrue during their years as a student. If you died, all your federal student loans would be forgiven. However, private student loans, and any other private loans you may have secured, would not be forgiven. Now is a good time to think about coverage for any cosigners or business partners you may have on any of your loans.
  • Financial Dependents: If you have kids, life insurance can protect them from financial insecurity if you died and no could no longer provide an income. Life insurance is also a great way to cover spouses, partners, siblings, parents, and even business partners from financial stresses.
  • Future Family: You may not have a family yet. Most young adults are waiting up to 10 years later than previous generations to begin thinking about starting a family. Locking in a low life insurance rate now when you’re young still makes a lot of sense. You’ll have the protection later when you need it, but you won’t have to pay as much for it.

What Is the Best Life Insurance For Young Adults?

There are numerous types of life insurance to choose from. Let’s break them down and see what the best fit for a young adult is:

  • Whole Life: Whole life insurance stays with you until you pass. As long as you pay the premiums, your policy is active. There are no time limits on these policies. Whole life insurance also has a cash value you can draw from as needed eventually, once the value builds. The difference will be taken out after your death. Now, how is this relevant to young adults? Whole life gives you the opportunity to start building your financial portfolio, as it is an asset you pay into each month that, again, holds a cash value.
  • Term Life: Term life insurance is the most popular. You can buy coverage spanning 5 to 30 years, covering you in the event of your death. Term tends to be much cheaper and easier to access, which helps your bottom line. Use this general rule of thumb: apply for 10 to 15 times your annual income of coverage. Term life builds no cash value.
  • Employer-based Life: Work-related policies can be a great employee benefit. Most life insurance agents would tell you to capitalize on your work policy but also to buy a personal policy. The caveat with employer life insurance is that when you leave your job, you are not able to take your life insurance policy with you. And according to CNN Business, the average young adult changes jobs an average of four times by the age of 32. Plus, employer life is group insurance, which limits your coverage amount.
  • Final Expense or Burial Insurance: Burial insurance is just as it sounds — insurance to cover your burial expenses or any other smaller debts you may incur. Funerals today are expensive. Some caskets can cost over $10,000. Having a final expense policy helps dependents cover most funeral costs during an emotional time.

Do You Really Need Life Insurance Now?

Some people are not good candidates for life insurance as young adults. If you are single and without any debts or dependents, the need for life insurance is minimal. Unless you anticipate having a spouse or dependents in the coming years, you may not need coverage.

If you are a low-income earner and can’t budget a life insurance policy, again, now may not be the time to find a policy. You have done a lot of the legwork already by reading this article and learning the reasons and types of life insurance you will need in the future. Pat yourself on the back for “adulting” early!

Anyone under the age of 18 cannot buy a policy. There are riders an adult can add to his or her policy to cover you, but this method provides a minimal amount.

Life insurance may fall low on your priority list. We get that. But now is the best time, at your young age, to grab a policy cheaply. Trust us. You will thank yourself 10 to 15 years from now for buying a policy today.

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