So, someone has approached you and said you need life insurance. Maybe they even offered a deal on affordable term life insurance, but you think there’s no way you need that! You’re young, in your prime, and there’s no way you’ll die in the next twenty or thirty years. Barring a tragic accident, you’re probably right. That’s not the only thing life insurance is good for, though. It’s also a way to save money and create capital you can borrow against or use as equity when you need it.
How It Saves Money
The most obvious reason buying life insurance young saves you money is because younger people secure lower premiums. The younger and healthier you are, the less likely you are to die, which means the insurance company will calculate a lower monthly payment as a type of incentive to buy in. They can do this because the company assumes a lower risk with young people. If you have a term life insurance policy, but don’t die within the term, then the policy doesn’t have to be paid out and the company can considers your premiums profits.
Why Buy Life Insurance
Even though you’re saving money on the cost of insurance, you might be wondering why you’d want to purchase it if the insurance company is the one benefitting from your policy. There are plenty of reasons! The first is to secure something that’s an “insurable interest.” For example, if you just bought a home and will be making mortgage payments for the next thirty years, a thirty-year term life insurance policy is a way to protect the investment if you die. Your family or spouse can use the death benefit to clear out major loans instead of having to take on the monthly payments themselves. Other policies offer payouts if you’re diagnosed with a terminal illness or financial support to pay for major medical treatments for certain ailments.
There is also the option to purchase a whole life policy, which is more expensive but guarantees a benefit for you. These policies can be paid out after a certain amount of time whether you’re alive or not. They also tend to offer other living benefits that may help you with retirement or medical issues in your old age.
Buying life insurance may seem like a frivolous choice if you’re young, but it can help you save money and prepare for unforeseen circumstances.