Life insurance might seem like a product you’d take out much later in life, say when you’re 50 or 60
Yet, many under 30 are reaping the benefits life insurance brings, from peace of mind to financial security for their loved ones.
You may already have a young family in tow, be fortunate enough to buy your first home or are simply planning for your future. If this is true, life insurance could be right for you.
Whether you’re 18, 23 or 29, taking out life insurance could give you and your family peace of mind in case the worst happens. It’s not as dramatic as the movies play out, instead, it’s ideal if you want loved ones, to be supported in case you pass away.
You probably have a few questions about life insurance first, and we’ve answered them for you below.
The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser.
Simply, it’s a life insurance policy that’s taken out when you’re younger. You’d normally take it out if you wanted to cover mortgages and debts or offer your family some stability if you suddenly pass away. You may just take it out for peace of mind.
As a young adult, it’s no different to a life insurance policy you might start when you’re 40 or 50 and works in the same way. Essentially, you arrange the total amount you want to be covered for and the length of time you want your policy to last. As life throws us so many curveballs, it’s often better to be prepared, especially if you have a young family or a large mortgage to cover.
Life insurance is designed to pay out if you pass away, offering your family some stability and financial support. Everyone’s circumstances and priorities are different. Some might start life insurance to cover their young family, whereas others could purchase a policy that covers them for a mortgage.
You might consider a life insurance policy if you:
Whatever your reason, you’ll want a life insurance policy that covers the right amount and offers you reassurance.
As you decide the total amount of cover you want, you’ll have an idea of how your death benefit might be used. For example, you could purchase a policy to cover the remaining amount on your mortgage, or you may want to just help your partner pay the bills.
|Here's how your life insurance policy can be used:
|To protect your children
|To look after your spouse or partner
|To relieve your loved ones of your debts
|To help those who are financially dependent on you
Certain lifestyle choices affect your insurance premiums, causing them to be higher. If you’re looking into life insurance, you’ll need to share:
It’s important to be honest when you apply for life insurance as it can affect your loved one’s ability to claim. If you aren’t honest your loved ones may find that the insurer is unable to pay the claim, at the time when your loved ones need it the most.
The type of life insurance policy you want depends on what you want to use it for and how much cover you desire. These life insurance policies offer young adults’ peace of mind and protection for their loved ones.
Decreasing life insurance is designed specifically to cover the amount owned on a capital and interest repayment mortgage. You’ll purchase your life insurance policy for the same term as your mortgage, for example, a 25-year mortgage and a 25-year life insurance policy. You’ll select the total cover amount you want and will pay fixed premiums until your policy expires. When the cover starts you should normally choose an amount that covers the initial amount you have borrowed. Then as you repay your mortgage and the amount you owe goes down, the amount of cover on your decreasing life insurance also goes down.
At the end of your policy, your mortgage should either be completely repaid or almost fully repaid. If you were to sadly pass away before your term ended, the amount of cover at the time would be used to repay all or some of your mortgage, leaving your loved ones with little to no inherited debt.
Level term life insurance allows you to select the total amount you want based on the term you need. Your cover could last from five to 50 years, allowing you to plan for your family’s future. You’ll pay a fixed premium each month to your insurance provider. And, as long as you continue to pay premiums on time and in full, you’ll stay covered. The amount of cover provided by the policy also remains fixed, so whether you die after 2 years or 20 years, the amount paid out won’t change.
If you pass away during your policy term, your death benefit will be handed to your beneficiary, whether that’s your parents, siblings, children, friends or a partner. If you’re fortunate enough to outlive your policy, you may be free to purchase a new one, or you may feel you no longer need one.
Increasing term life insurance is designed to increase over time (either by a fixed amount or linked to the rise in inflation). This means your pay-out shouldn’t be at much of a risk of being affected negatively by inflation. Simply put, if you take out a policy for 50 years and pass away in the 49th year of your policy, your total death benefit could closely match the cost of living 49 years after you take out your policy.
Of course, the downside to this is that the cost of your policy will usually increase as well, depending on the provider.
Please note, LV= does not currently offer increasing life insurance policies directly through LV.com. If this is something you’re interested in then you’ll need to speak to a financial adviser.
The main difference between whole of life and the above three term life insurance types is that there’s no fixed end date. Unlike term life, a whole of life insurance policy only expires when you pass away. For whatever reason, you might want a life insurance policy that guarantees a payout, as long as you keep up with your monthly premiums.
Whole of life is more expensive to purchase. As there’s a chance you’ll live longer, it can be expensive to manage and mean higher monthly premiums compared to a fixed term policy. Even if you take this type of policy out in your 20s, you may find you’re paying more for it over time.
Please note, LV= no longer offers whole of life insurance policies.
Despite being young, you may want to add critical illness cover to your existing policy. If you have children, you can also ensure they’re covered if they are diagnosed with a serious or life changing illness too. Although critical illness cover is often added on a just-in-case solution, it’s a smart choice to do so. Most of us have been affected by or known someone who has been critically ill and, sadly, it’s more common than we like to believe.
At LV=, we’re proud to have supported thousands of families and individuals over the years who have had to deal with tragedy. If you’re looking for life insurance that offers you peace of mind, why not get a quote from us today?
If, however, you’re unsure and need further advice, we’ve partnered with LifeSearch. They offer independent professional advice based on your individual needs.