Term Life vs. Whole Life Insurance for Young Adults
Recent college graduates, adults out on their own for the first time and young men and women just leaving military service aren't likely thinking about their need for a life insurance policy. In fact, it may be furthest from their mind. Their employer may offer it but they may opt out, not wanting to spend a few dollars a month on the slim chance they might die and leave something to family.
While it's true that the likelihood of death before one's thirtieth birthday is quite small, the destruction it can leave is immense. Policies on those under 30 don't need to include a huge benefit, they should cover any outstanding debts and allow for the funeral costs that will be associated with their death.
Term Life for Young Adults
Term life insurance has some great benefits for young adults. First and foremost, it's much less expensive than whole life insurance. Secondly, unless there are dependants the young adult provides for, the financial need is relatively small in case of their death.
As the young adult ages, the term life insurance policy may offer the option of renewal or conversion to a whole life policy. The whole life policy will continue to grow. This is great news for the young children and spouses of these adults.
Term life is a great idea for adults under 30. As long as the policy covers unresolved debts and burial costs, nothing more is needed. Term policies should remain in effect through the thirtieth birthday, then offer a renewal or conversion option.
Whole Life for Young Adults
Whole life insurance policies are a bit like fine wine - they get better and more enjoyable with time. They are also more expensive the longer you wait to buy them. This is why some parents and young adults choose to pick up whole life policies early in life.
Premiums are inarguably higher with a whole life policy compared to one that is limited to a term of anywhere from one to twenty years. These premiums do offer a very distinct benefit compared to term life, though, the ability to borrow against the policy. What's more, the policy holder isn't required to pay back the loan, it can simply be deducted from the death benefit.
This is great news when those pesky college loan bills start filling the mailbox or the adult finds a fixer-upper and needs a down payment. As the policy holder enters middle age, dividends earned by the whole life policy can be withdrawn and used for investments for retirement.
If you are a young adult or the parent of one concerned about an untimely death causing financial hardship, you need to consider life insurance of one form or another. Term life is best suited to those with no dependants and less than twenty years until their thirtieth birthday. The limitation is that the policy may simply expire at the end of the term and all premiums paid could be forfeited.
The more long-term solution is a term policy with an option to renew or convert to a whole life policy. The premiums are low at the beginning but do go up after the conversion.
Whole life is the best policy choice if you are looking for one to last a lifetime. Another benefit is the ability to withdraw from the policy when needed periodically.
Consider your goals and financial situation when you decide which type of policy will serve you best.