Why young adults should start thinking of life insurance covers

Digital Team / 15 July, 2024 /        

When you're in your 20s and just beginning to build your career, the thought of getting life insurance might not even cross your mind. At this stage, you're likely more focused on enjoying the fruits of your labour and the newfound freedom of youth. While there's nothing inherently wrong with that, putting off insurance planning while you're young can result in a significant financial burden in the future.

Life insurance serves as a financial cushion for you and your family in the event of the worst-case scenario, such as being diagnosed with a terminal illness or becoming physically disabled. Financial planning as a young professional not only benefits you but also provides essential financial support for your loved ones. It helps them cope with unexpected events, whether they occur tomorrow or several years down the road. In the unfortunate event of your untimely passing, life insurance ensures that you'll have something to leave behind for your family.

If you're still undecided about signing up for life insurance, it’s important to understand why it’s better to start planning while you're young. Insurance companies calculate premiums and coverage based on a person's age and health. Generally, your premiums increase as you age. By signing up for life insurance at a young age, you can reduce the total amount you'll have to spend on insurance over your lifetime compared to starting later. Younger people are typically healthier, and as we age, we are more likely to develop serious medical conditions. This means that insurance companies will need to pay out more, leading to higher costs that are passed on to policyholders in the form of increased premiums.

As you get older and develop chronic medical conditions, most insurance policies will exclude coverage for these pre-existing conditions. This means you'll have to pay out of pocket for treatment and medication for these conditions. However, when you start planning for insurance as a generally healthy young person, you can ensure full coverage for any serious illnesses that may develop later in life, including comprehensive coverage for your medical expenses. While it's unpleasant to think about being diagnosed with a critical illness or experiencing an accident in the future, these possibilities cannot be ruled out. If the worst-case scenario happens, it's worth asking yourself: "Am I financially prepared for it?" Chances are, as a young professional, you aren't. But with life insurance, you won't have to worry about being a financial burden on your loved ones. Many life insurance policies can be purchased with a rider to cover permanent disability, ensuring you're covered not just for medical expenses but for other emergencies as well. Insurance planning is particularly crucial if you plan to start a family or have dependents relying on your ability to provide.

If you pass away, your life insurance policy can take care of your existing debt, relieving your family of the responsibility. Even if your debts were co-signed, your life insurance would cover any outstanding debt you've incurred, including home loans or credit card balances. Through early insurance planning, you can spare your family from the stress and pressure of dealing with financial obligations during an already difficult time. In addition to providing medical and emergency coverage, life insurance can serve as a form of long-term savings. Depending on the coverage, the value of your policy may accumulate over time, unaffected by rising inflation rates. You can consider it a low-risk savings option since your insurance company will bear the risks. If no emergencies occur, you'll have something valuable to leave for your family, often more than the total amount you've spent on insurance. Whatever the future holds, life insurance guarantees that you and your loved ones won't have to face financial hardships.

After understanding the benefits and importance of life insurance for young adults, you might be curious about the different types available. The three most common types are Term Life, Whole Life, and Investment-Linked Policies (ILP). Term Life provides a death benefit if the insured person passes away within a specified term. It's generally cheaper because it offers only a death benefit within a certain period. Whole Life covers the beneficiary for their entire lifetime and often includes a savings component and critical illness coverage, in addition to the death benefit. Investment-Linked Policies (ILP) combine investment and protection, with part of your premiums invested in funds of your choice, while also covering death, disability, and critical illness.

Young adults have their whole lives ahead of them, but the only way to ensure a secure future is to plan for it early. By familiarizing yourself with financial tools like insurance and investments, you can maintain and even enhance your quality of life in the years to come.