Choosing the Best Life Insurance Policy for Young Adults

It’s not immediately obvious to young people that life insurance is for them, too. For their parents? Sure. But when you’re young, life can feel endless, and spending money on life insurance can feel pointless. 

But the fact is that life insurance for young people isn’t just smart — it’s a great way to care for your family and future. 

Why Young Adults Should Have Life Insurance

The purpose of life insurance is to financially protect your loved ones if you die, whether or not you have dependents.  Life insurance can help cover the costs of a funeral, pay off your debts or provide for other needs that can arise. Most importantly, it can provide peace of mind for your loved ones during a difficult time. It’s a way of showing your love and care, even after you’re gone. 

There’s an added benefit to purchasing life insurance as a young adult: Generally, life insurance is less expensive if you purchase it when you’re younger and healthier. That price gets locked in for the life of the policy, so you’ll be able to pay the premiums of a young person far into the future. That premium could be less than a dollar a day. 

Your choice of the best life insurance policy for your needs as a young adult is based on your life insurance goals. Term life insurance and whole life insurance are both great options for young people. Let’s take a closer look at these two types of coverage to help you decide which option is best for you. 

Term Life Insurance for Young Adults 

A simple way to think about term life insurance is to compare it to renting. It’s a temporary coverage option. 

Young adults under 30 are often at an advantage when it comes to term life insurance. Generally, you’ll qualify for a lower premium compared to whole life insurance. When you’re young and starting your career, you may not have a lot of extra income. Term life insurance is an affordable way for young adults to get the protection they need for a set number of years.

Do you have a family? Term life insurance is a good option for young families because it can offer protection for your children as they grow up, giving you peace of mind should anything happen to you. The death benefit could help replace your income for your family, pay off your mortgage, help cover bills and send your children to college. 

There are different types of term policies, so you’ll need to know which is best for your needs. A “level term” policy will keep your payment steady. “Increasing term” policies grow in value as your needs grow, helping cover things like additions to the family and lifestyle changes that come as salaries increase.

There’s also the “return of premium term”, which will return a portion of your premiums at the end of the term (in other words, at the end of your time paying into the policy). Additionally, you can generally opt to convert your term policy to whole life insurance, giving you coverage for life.

Whole Life Insurance for Young Adults

If term insurance is like renting, whole life is like buying. A whole life insurance policy is a permanent coverage option that guarantees you’ll have coverage for your entire life. 

Whole life insurance premiums are generally higher than term life insurance premiums, but because your coverage is guaranteed for life, you won’t have to worry about the premiums increasing as you grow older. This means whole life insurance can be an investment in your future. Whole life insurance may also make sense for young adults who are getting started in the workforce and are anticipating that their salary will increase over time.

As you pay your premiums on your whole life policy, it will accumulate cash value. This cash value grows on a tax-deferred basis, which can allow your funds to grow faster. As you get older, you’ll have options to cash in your whole life insurance policy.

Depending on the type of policy, you may be able to borrow against the cash value for future financial needs, such as starting a business, buying a home or supplementing your retirement income. Keep in mind that any money you withdraw might be subject to fees and might be considered a taxable event. Any loans from the policy’s accumulated value will reduce how much your beneficiaries receive if the borrowed funds, plus interest, are not repaid by the time of your death.

Preparing for the Future

Whatever your life situation, life insurance is a smart move. Our Farm Bureau agents make insurance simple so you can tackle life’s adventures with peace of mind. Talk to your local Farm Bureau agent for help choosing the right life insurance policy for you.