Do Millennials Actually Need Life Insurance?

There's a lot on Millennials' minds when it comes to money.

Many are paying off student loans, trying to save for retirement, squirreling cash for a future home, planning a wedding, or thinking about a child's college expenses. For a lot of us, the thought of another monthly expense simply isn’t realistic.

On the other hand, many of us don't talk about death because, well, it’s uncomfortable. Who wants to think about their life being unexpectedly cut short?  

Regardless of your age, there may be people who depend on you financially. Or you may have family members who would be stuck paying your debts if you suddenly passed away.

If the unthinkable happened, what do you hope the outcome would be? The truth is, you have more control than you might think. That’s why it’s worth considering whether or not life insurance makes sense for you.  

This article was sponsored by SelectQuote, but all opinions are 100% my own. If you find it useful, please share it with the hashtag #SQinsurance!

How Many Millennials Actually Have Life Insurance?

Life Happens, a nonprofit consumer group formed by insurance providers, conducts an insurance barometer study every year to determine generational attitudes about life insurance.

Here is what their 2016 study found:

  • 51% of millennials currently have a life insurance policy.
  • 55% of millennials wish their spouse or domestic partner would purchase coverage.
  • 51% of millennials estimate surviving members of a household would immediately struggle to pay for living expenses in their absence.
  • Competing financial priorities is the main reason half of millennials haven’t purchased life insurance. These priorities range from general costs of living (62%) to vacations (15%).

What Does Life Insurance Cover?

The purpose of life insurance is to help provide financial security for loved ones if you died.

A life insurance policy’s death benefits can be used to cover:

  • Lost income
  • Outstanding debts like a mortgage, medical bills, or unpaid taxes
  • Cost of childcare for a stay-at-home parent
  • Settling your estate
  • Final expenses like a funeral, wake, cremation, or burial
  • Funding education for your children
  • Transferring wealth or leav an inheritance for your family
  • Business purposes

Does Life Insurance Make Sense for You?

If you’re young, single, and debt-free life insurance may not make sense. But here are a few common scenarios to think about:

  • Do you have children? For many millennials, having a child is the trigger that motivates the purchase of a life insurance policy. Your death could leave a significant financial burden on your family.
  • Does your partner rely on you financially? You may both be contributing, but does your partner rely on you to cover a portion of the monthly budget? Are you paying down debt like a mortgage? It’s worth assessing your combined savings and debts.
  • Do you have a large amount of co-signed student loans? Many millennials are still paying down a significant amount of student debt. And many of these loans were co-signed by a parent. If you suddenly passed away, your parents may be on the hook for the balance.

What Type of Life Insurance is Right for You?

There are two types of life insurance products available and it can be difficult to determine which is best for you—especially when you’re being hit with an aggressive sales pitch.

Term life insurance is financial coverage that lasts a specific amount of time, usually 10-30 years. Term life insurance is known for having lower monthly premiums and there is a guaranteed death benefit for the policy holder.

The policy stays active as long as premiums are being paid. However, one negative about term life insurance is premiums can become significantly more expensive if you need to extend the term later in life.

Permanent life insurance is financial coverage that lasts a lifetime and it can come in either whole or universal form.

Permanent life insurance is a more complicated product because it has a cash value that can fluctuate over time. Because it covers an entire lifetime, premiums are significantly higher than term life insurance policies.

If you are considering permanent life insurance, it’s worth discussing with a trusted financial planner who isn’t earning commission on the product.

For many millennials, term life insurance is the right choice. It’s much cheaper, simpler, and you won’t be stuck with an expensive policy you don’t need later in life.   

How Much Life Insurance Do You Need?

Once you have determined you need life insurance, the next step is figuring out the amount you need. That part can be tricky.

Fortunately, Matt Becker from Mom and Dad Money created a handy spreadsheet to help you figure this out.

His process includes outlining the following:

  • Your current budget
  • Projecting income and spending changes if a partner dies
  • Calculating your total debt
  • Determining lump sum wants and needs
  • Figuring out what Social Security will cover
  • Adding in current savings

His post is super in-depth, and I highly recommend reading it once you have reached this step, especially if you have a family.

Your employer may offer a group life insurance plan, but it’s worth reviewing the policy to make sure their coverage meets your needs. It’s also worth considering what happens when you eventually leave your job. Does the coverage end? If not, what’s the cost to stay insured.

In many cases it may be smarter to opt for an individual policy.  

Where To Find a Term Life Insurance Policy

If you’re the type of person who prefers doing your own research, you may want to check out SelectQuote. They have been in business for over 30 years and can help you find the lowest cost option.

SelectQuote offers unbiased price comparisons of your best rates from highly-rated life insurance companies. Their agents are committed to answering your questions, keeping the application process simple, and helping you make informed decisions.

The Bottom Line with Life Insurance

Making a decision about life insurance isn’t easy. Regardless of what you decide, it’s important to do your own research and try to avoid being pressured into buying a costly policy from sales people who don't have your best interest in mind.

Remember, a life insurance policy shouldn’t be part of an investment strategy—it’s a financial protection plan meant to cover your loved ones if you were no longer here.

Readers: Do you have a life insurance policy? What motivated your purchase?

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Discussions — 12 Responses

  • Matt @ Optimize Your Life October 25, 2016 on 7:16 am

    I picked up life insurance through my employer when I got engaged. I didn’t get much, but it is an extremely low monthly fee, so I decided to go for it anyway. I plan on drastically upping the amount of coverage I have when kids are in the picture. My wife is not dependent on my salary, but I would like to make sure that if something happens to one of us the other has options with regards to child care and work.

    • Kate Dore Matt @ Optimize Your Life November 20, 2016 on 3:06 pm

      Sounds like a solid plan, Matt!

  • Colin @rebelwithaplan October 25, 2016 on 10:13 am

    I’m still super puzzled when it comes to life insurance and what to get. I know it’s important, but I’ve been putting off thinking about it. Thanks for including all the good resources! Saving this for later.

    • Kate Dore Colin @rebelwithaplan November 20, 2016 on 3:06 pm

      Figuring out how much you need is definitely a challenge. That’s why I’ve linked to Matt Becker’s resources. Super handy!

  • Penny @ She Picks Up Pennies October 27, 2016 on 8:00 pm

    I wrote about it today! I actually always just assumed I was fine because I have it through my work, and my husband would also get a little payout from what I’ve put into my pension. Then, I did the math. He would get $80,000…which isn’t even HALF of our mortgage! EKKK!

    • Kate Dore Penny @ She Picks Up Pennies November 20, 2016 on 3:07 pm

      Yikes! It’s great you’re thinking ahead, Penny.

  • Life Insurance: You Need It - Hope+Cents November 1, 2016 on 3:02 am

    […] My post today is not long. It is not technical. This post will not walk you through the different types of insurance (although, term insurance is usually the way to go) or the steps of determining how much insurance you need. There are tons of articles out there about that. A few to check out can be found here, here, and here. […]

  • Derek @ MoneyAhoy November 1, 2016 on 11:10 am

    The only reason to have life insurance is the help dependents that you may leave behind when you pass. This is to ensure they aren’t saddled with debt and get thrown out while they try to rebuild their life. For many millennials that are still single, there isn’t much of a point to getting life insurance.

    For us, we have enough to pay off the house and that’s it. Don’t forget that social security will also kick in and help cover the cost of raising any kids until they turn 18.

    • Kate Dore Derek @ MoneyAhoy November 20, 2016 on 3:08 pm

      Great points, Derek. I agree it may not make sense for many millennials without children or debt.

  • Sarah November 2, 2016 on 1:15 pm

    Thanks for this common-sense reflection on life insurance. Most just make it sound as if everyone needs it, even if they have no dependents or debts, which I find quite irresponsible.
    Thanks for an interesting read

    • Kate Dore Sarah November 20, 2016 on 3:09 pm

      Thanks for reading and commenting, Sarah!

  • Millennial Money November 21, 2016 on 8:18 pm

    Life insurance seems like a good decision for Millennials and other young professionals because saving early for coincidences is always better than saving late. Thanks for this good post.


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