In a changing economy and job market, many millennials are postponing or even avoiding many of the standard life milestones of previous generations. For example, millennials tend to get buy their first homes, commit to marriage, and buy their first life insurance policies later in life than their parents did.
Many millennials avoid purchasing life insurance because they buy into the myth that young people have no need for life insurance, which we discussed in our previous blog, “Unmasking the Top 3 Myths of Life Insurance.” Even young and healthy people may need life insurance. Specifically, millennials may need life insurance for the following five reasons.
- Cover Loss of Income
When most people think about life insurance, they picture a policy that only covers end-of-life expenses if they should pass away. While this coverage is the primary purpose of life insurance policies, many policies also allow for “riders.”
An insurance rider is a supplemental type of coverage that you can add on to a standard policy. In the case of life insurance, you may choose to add a disability or long-term care rider. This coverage would help you pay for medical bills and cover lost wages if you became sick or disabled.
You may need to consider a separate policy or a rider, even if your employer-provided insurance comes with life insurance coverage. Often, employer-provided policies only account for end-of-life expenses. Your employer-provided policy could also fall short if you were laid off, changed jobs, or if the company you work for went under.
- Create a Portfolio Asset
In addition to potential riders, life insurance policies also offer a smart savings option. If you have a permanent life insurance policy with a savings component, you can turn your life insurance into an investment portfolio asset.
Unlike your 401(k), this type of life insurance has no savings limit. You can borrow against this policy or use the saved funds during retirement tax-free. Some policies even allow you to borrow against the life insurance policy to cover any gaps in your health insurance. For example, a life insurance policy may help you pay for procedures that your health insurance provider does not cover, such as experimental cancer treatments or certain surgeries.
The restrictions on this savings option depend on your individual policy, so if you plan to invest in life insurance to diversify your portfolio, consult with an insurance specialist as you shop for policies.
- Discharge Outstanding Loans
Millennials are more likely to leave college with substantial student debt than previous generations. The College Investor reports that the class of 2016 has an average debt of $37,172—nearly $19,000 more average debt than the class of 2003.
While federal student loans are discharged in their entirety if the debtor passes away, not all private loans are automatically discharged. Your parents, co-signer, spouse, or dependents may be responsible for the outstanding costs of your student loans if you do not have a life insurance policy to cover them. Insurance experts recommend purchasing a life insurance policy that would cover the entire cost of your current student loans if you were to pass away unexpectedly.
- Pay for Funerary Expenses
Life insurance policies are also important in their original context as a way to cover end-of-life expenses. Many millennials have difficulty saving money due to the current job market and economy. For young couples and families, an unexpected passing could lead to serious financial problems.
According to SmartAsset, funerals currently cost between $6,000 and $10,000 on average. If you do not have that amount saved up in case the worst should happen, consider a life insurance policy. Even if you have adequate savings, your dependents may rely on that money to cover home expenses and lost income if you should pass away, so insurance may still be a smart investment.
- Protect Business Investments
Many millennials decide to create their own businesses instead of joining the traditional workforce. This choice can provide entrepreneurs with flexible work options and a bright corporate future. However, many small businesses would have to close if one of their executives were to pass away.
If you’re an integral part of an expanding business venture, consider a key-man life insurance policy. This specialized type of life insurance helps compensate for the financial losses that may occur after critical business personnel pass away. As you work to build and protect your business, discuss the option of purchasing life insurance policies for the people who are instrumental in keeping your small company running.
While millennials may not live by all the rules of previous generations, it’s important to prepare for and protect your future. Even if you’re young, healthy, and single, life insurance may still be a vital part of your insurance coverage. Discuss your life insurance options with a representative from Metropolitan Insurance Service Consultants today.