Here at I&E, one thing that we’ve found is that while “technically” purchasing a life insurance policy in your 20s is a fairly simple process (for most), trying to get someone in their 20s to comprehend that one day they might die or they might end up suffering from an illness that commonly affects older folks in the United States such as:
- Heart disease, or
Can be a bit challenging.
It can also…
Be quite difficult for someone who is in their early 20s to fully understand just how quickly their life can (and probably will) change once they begin to take on many of the responsibilities that follow:
- Getting married,
- Having children,
- Purchasing a home,
Or transitioning from a “job,” to a career.
This is why…
It’s so easy for someone in their 20s to simply decide to “put off” purchasing a life insurance policy completely or end up purchasing a term life insurance policy as a “quick fix” because they aren’t fully committed to the idea that they really do need to have a life insurance policy in place.
As a result…
We’ll often get a call from folks in their mid-30s either looking to purchase more insurance or to make changes to the life insurance policy that they purchased just a few years earlier because what they bought back then isn’t adequate for them now.
And in all fairness…
It’s easy to see why this happens.
First of all, folks in their 20s typically don’t have the same “insurance need” as someone in their 40s, 50s or 60s.
Secondly, in most cases these individuals won’t have any health issues so it will be difficult for them to imagine that one day they may have difficulty being able to qualify for a life insurance policy.
The allure of being able to purchase a term life insurance policy for very little money. and in some cases without having to take a medical exam. may seem too good to pass up.
This is why…
We wanted to take a moment and discuss why purchasing a whole life insurance policy in your 20s might be a better idea for those looking to purchase a policy that will meet their needs for the rest of their life, rather than for just the next 20 to 30 years.
“Note to the Reader”
Often times, you’ll find that many financial advisors will recommend Term Life Insurance over Whole Life Insurance because it is less expensive. A common phrase that is often spoken by agents will be “buy term and invest the difference”, and while in “theory” this approach might work, what we have found is that most folks don’t “invest the difference”.
Sometimes, in our opinion, Whole life insurance is sometimes just a better option for some than a Term Life Insurance Policy (See Top 10 Reasons when Whole Life is Better than Term).
When used properly, some dividend paying whole life insurance policies can be used as a “savings account” as opposed to an “investment tool”. In cases like these where a traditional savings account essentially earns next to nothing, a whole life insurance policy could earn much, much more! This is something we’ll talk about later on in our discussion of why purchasing a whole life insurance policy in your 20s might be your best option.
It is true that life insurance agents will typically earn a larger commission for selling a whole life insurance policy vs a term life insurance policy, which is why we do not try to “SELL” anyone on any particular “type” of life insurance. All we do is present options to folks and let them decide.
And with that said, let’s now present our case on why purchasing a whole life insurance policy in your 20s might be your best bet.
Top 5 Reasons You Should Buy a Whole Life Insurance Policy in Your 20s
Term Life Insurance (typically) won’t last forever.
Because we offer a wide variety of different insurance products here at I&E including term life insurance, we know that one of the most common questions we get regarding term life insurance is…
“What happens when the TERM ends?”
This is because for many, it’s surprising to learn that if they purchase a term life insurance policy today and pay the premium for the next 20 years, at the end of it all, the policy will simply end and they will get nothing in return.
This is because…
During all that time they were insured, but when the policy ended, that coverage ended as well. It’s sort of like auto insurance.
If you purchased auto insurance last year, and didn’t have an accident, you really didn’t benefit from owning that policy. The only difference in this situation is that you can continue to keep your auto insurance, while with a term life insurance policy, once it ends, it’s over.
There are some term life insurance policies which will contain a clause stating that it is guaranteed renewable at the end of the original term. Which is good, but what most folks won’t tell you is that once your expired term life insurance policy goes into the “guaranteed renewable” clause, the fixed price that you have grown accustomed to paying will likely change year after year because your “guaranteed renewable” policy will only allow you to renew one year at a time.
The “change in price” will typically be OUTRAGEOUS, because the insurance company will typically prefer that you reapply for another term life insurance policy which will require you to either take another medical exam or answer a series of medical questions which could prevent you from being able to qualify for a new life insurance policy, leaving you one of two options:
- Option one: Go without insurance
- Option two: Continue to pay the “outrageous” premiums which will likely continue increasing every year!
This is why…
Seeing how, even if someone in their 20s decides to purchase a 30-year term life insurance policy (the longest term commonly available), chances are they will “outlive” this policy and find themselves in their 50s either looking for a new life insurance policy or being forced to go without.
Being Young is Great!
Let’s face it, being young is great! After all, there’s a reason why older folks are always saying things like:
- “I feel like I’m in my 20s again!”
- “50 is the new 30.”
And we’re happy for these folks, but the truth is, it doesn’t matter how “good” a 50-year-old feels, that’s not going to change how a life insurance underwriter views their life insurance application.
Or to put it another way…
Chances are if you don’t have any major health issues currently affecting you and you don’t participate in any potentially unhealthy lifestyle choices such as:
- Unsafe driving, or
- Dangerous hobbies.
Your life insurance will never get any “cheaper” than it will be if you choose to purchase today.
Which means that…
right now you probably have the best chance of being able to lock in the cheapest whole life insurance rates that you’ll ever be able to qualify for, so doesn’t it make sense to lock in a rate that will last forever vs one that will go away in 20 or 30 years at precisely the time you need it the most?
If you’re like many of us here at I&E who were always picked last in PE, the concept of having “bad genes” might not seem too foreign to you, but hey let’s face it, we’re not all built like George Burns who lived to be 100 and is credited with having smoked between 10 to 15 cigars a day for nearly 70 years.
Some of us…
Know that our family may have an increased risk for:
- Heart disease,
In cases like these where an individual may be well aware of the risks that he or she may face as they grow older, wouldn’t it make more sense to purchase a life insurance policy in your 20s that will last forever while your are young then to risk purchasing a term life insurance policy that could run out just when you really need it?
Let’s face it, not everyone in their 20s is perfectly healthy. And while we here at I&E hope that anyone in their 20s who is already sick or has some type of preexisting medical condition does improve, hope is not a plan.
This is why…
In cases like these, it may make sense to try and purchase a whole life insurance policy while you’re young (assuming that you can qualify) so that if your condition were to worsen you wouldn’t need to worry about trying to qualify for coverage later on.
Whole Life Insurance as a finance tool
Lastly, a cash value whole life insurance policy can essentially be used as a forced savings account when your younger which will provide you with a variety of options to use later on in life.
It is here were you will often hear many financial advisors complain that whole life insurance isn’t a good investment because the returns are typically much lower than other “investment opportunities” which is true.
Our take on it goes like this…
Your whole life insurance policy is not an investment but rather a “forced savings account” where the funds are readily available. You should compare the return on your policy to what one would earn in a typical savings account in the bank. Once you do this, you will begin to see some of the “hidden potential” that these types of life insurance policies can provide.
And there you have it…
Our top 5 reasons why someone in their 20s might want to purchase a whole life insurance policy. Now, we should note that despite these reasons, a term life insurance policy or some other type of permanent life insurance coverage might be the right option for you.
Fine with that. After all, our only goal here at I&E is to help you find the “best” life insurance policy for you. This is why we work so hard to maintain relationships with dozens of different life insurance companies so that when the time comes to help you determine which one is “best” for you, we’re sure to have plenty of options.
We just get bothered…
When certain life insurance brokerages automatically assume that a whole life insurance policy isn’t going to be right for you based on some pre-conceived opinion that they have regarding these “types” of life insurance policies.
If you’re ready to speak to a friendly and knowledgeable life insurance agent who is ready and able to go over all of your options with you and present these options to you in a stress free, no pressure way, just give us a call!