Should I Buy Life Insurance in My 20s?

Quick Answer

You should buy life insurance in your 20s if another person would face a financial burden upon your death, including your spouse, partner, children, parents or a business partner.

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In your 20s, buying life insurance likely isn't at the top of mind. You're probably focusing on paying off student loans or meeting basic expenses, and adding yet another bill to the mix can be hard to justify. Still, making room for life insurance in your financial plan may make sense.

It may be a good idea to buy life insurance in your 20s if you have dependents who rely on your income, you have a lot of debt or if you want to lock in a low rate while you're young and generally in good health. Locking in a good rate now can give you peace of mind knowing there's a financial safety net for the people you care about most.

When It Makes Sense to Buy Life Insurance in Your 20s

Purchasing life insurance may protect anyone who would be financially impacted if you die by providing them with a cash payout. The following are some instances where buying life insurance while you're young may be a wise choice.

  • If someone relies on you financially: Life insurance can protect anyone who depends on your income, whether it's your partner, spouse or children, or a parent, sibling or business partner.
  • You have a family or plan on having one: If you have a partner, spouse or children who rely on your income, getting life insurance is essential to help cover your family's living expenses and debts if you die. If you're single but want a family in the future, getting life insurance now can save you money in the long run since premiums are less expensive when you're younger and healthier.
  • You have large debts: Life insurance can make sure student loans, mortgages or other large debts are not passed on to your family upon your death. While federal student loans are discharged when you die, most private loans are not. Even if loans are forgiven, they can leave behind with a large tax bill.
  • You want to cover your final expenses: The average funeral costs $7,848, according to the National Funeral Directors Association. While you shouldn't have to worry about your funeral for years to come, anything can happen. Final expense life insurance can cover funeral costs so your loved ones don't have to.

Consider getting life insurance if you want to help mitigate the financial burden your loved ones might face if you die. Your beneficiaries can receive a tax-free death benefit, which they can use to pay debts, living expenses, college tuition or for any other purpose.

What Type of Life Insurance Should You Buy?

When it comes to life insurance, policies generally fall into two types: term life insurance and permanent (whole) life insurance.

Between the two insurance options, you may want to lean towards buying term insurance if you're in your 20s because you can lock in a better rate when you're young. Term life insurance is also significantly less expensive than permanent life insurance. But since term insurance one day expires, you may want to choose a 30-year policy so you don't have to buy another policy later—potentially with higher premiums—when you still need coverage.

Here's how they differ:

Term Life Insurance

Term life insurance covers you for a specific period of time—generally from one to 30 years—and if you die during that term, your beneficiaries receive a lump-sum cash benefit. With term life insurance, your premiums remain the same from when you purchase your policy unless you change your coverage.

A healthy 25-year-old female can expect to pay monthly premiums of about $27 for a 30-year, $500,000 policy, according to Policygenius. Term life insurance may be a good option for 20-somethings because you can lock in a better rate when age and health are on your side.

Permanent Life Insurance

Permanent life insurance, also known as whole life insurance, offers coverage that lasts the remainder of your lifetime plus the opportunity to accumulate cash value on a tax-deferred basis. As long as you pay the premiums, your policy remains in force.

Permanent insurance is considerably more expensive than term life insurance, with policies that can run hundreds of dollars per month. But the cash value may be worth it to you, even if the death benefit isn't issued for decades. By purchasing permanent life insurance when you're younger, the cash value has more time to grow than it would for older policyholders.

When You May Want to Wait to Get Life Insurance

The decision to get life insurance should be more about your needs rather than age. Here are some scenarios when you may be better off waiting to get insured or opting against getting life insurance altogether.

  • If you're single and have enough assets to cover your final expenses
  • If no one would be financially worse off if you pass away
  • If you have no children and your spouse or partner's income could pay for living expenses and debts
  • If you're financially independent and have the resources to pay off your debts and make sure no one would be hurt financially upon your death

If your death wouldn't cause a financial strain on anyone else, you might prefer to wait before purchasing life insurance. In the meantime, you could direct the money towards building your emergency savings, purchasing a home or other financial goals.

Review Your Credit Before Applying for Life Insurance

Life insurance may be a good option if your death could have negative financial consequences for someone else. If you decide to get life insurance, aim to choose an affordable policy that provides enough protection for as long as you need it. Remember, the longer you wait to get life insurance, the more expensive it becomes, as your health can change at any time.

Keep in mind that many states allow insurance companies to consider your credit-based insurance score when calculating your premiums. As such, you may secure a lower premium if you have good credit and happen to live in one of those states. Before you apply for life insurance, you may want to get your free Experian credit report and credit score to get an idea of your current credit picture, and work to make improvements if the number is lower than you'd like.

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