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Why You Should Make Life Insurance Your First Purchase

Life Insurance Your First Purchase

I remember getting my first real job. Having a steady, good-paying job made me feel grown up. I wasted no time running out to buy a new car. My old bucket just wasn’t going to do it for me any longer. But that wasn’t the best way to invest my new income. Don’t do what I did. I was quickly making all the big financial fails. No, you should make life insurance your first purchase.

I know, you’re just starting out in the world and you’re going to make your mark. You’re thinking you have plenty of time for “adult” things like life insurance.  And there are so many cool things you can buy, like a new car, a great vacation, or even a first home. Some of these purchases are necessary and others are just fun, but there are good reasons to make life insurance your first purchase.

It’s not just for families

It’s easy to think of life insurance as being something for people with a family or dependents. That’s just not true. It’s also not just for people with lots of assets to protect. In fact, there are considerable advantages to buying a life insurance policy early in life. If you can place that new car purchase on hold for just a few minutes, below you’ll find a list of reasons why making life insurance your first purchase makes sense.

Understanding life insurance

Before you consider buying a life policy, you first have to know what it is. How does life insurance works? In fact, life insurance is a contract between you, the policyholder, and an insurance company. The insuring agreement is simple enough, if you pay the premium the insurance company will pay out a lump sum upon your death to a beneficiary.

Life insurance isn’t a single solution, there are many types of life insurance policies. Before you select a life insurance product, you should work with a financial advisor to establish your goals. You see, life insurance has a variety of flavors, from a simple burial policy to a sophisticated investment instrument – which one is right for you?

Reasons to make life insurance your first purchase

If you believe you only need life insurance if you have a family to protect, you would be incorrect. Life insurance isn’t just for people with large insurable interests that need to be protected the in the event of their death. Life insurance policies can be more than a death benefit. When you consider some of the other benefits of a life insurance policy, buying when you’re younger begins to make more sense.

There is a popular saying amount insurance agents and financial planners that says, “the best time to buy life insurance is yesterday.” In other words, buying sooner rather than later makes more sense. Here are some reasons you should consider buying life insurance when you’re young.

1 ) It increases in price as you get older

One major factor in the cost of life insurance is your age. In fact, the premiums for a new life insurance policy will increase each year as you age. As a result, you can save a lot of money by purchasing life insurance when you’re young. In fact, if you’d like to have a family someday, or simply to leave a financial legacy, then buying life insurance when you’re young is a great investment choice. 

2 ) It’s expensive to be buried

Even when you’re young there will be loved ones, immediate family, or possibly friends who will become responsible for your estate after you pass. Early in life you’ll have less money saved, and life insurance becomes more useful should your estate not have the funds to pay for end-of-life expenses. Life insurance helps your beneficiaries cover the cost of a funeral in the event of an untimely death. In the United States, the average funeral cost is well over $10,000, and life insurance will help with those expenses. In fact, because end-of-life expenses are so high, there is a specific life insurance policy called final expense just for these costs. 

3 ) It protects your family’s financial security

You will have a family someday. Even George Clooney now has a family. When you have your family, life insurance will help protect them and handle the loss of the income you provide. Your life insurance protection will help your family cover costs that your income paid for, like the mortgage. The right life insurance can help your family remain in their home, cover current and future debt payments, and provide financial comfort allowing them the comfort to grieving properly.

4 ) Going to have children?

The majority of families have children. So, if you plan to have kids, life insurance protects them in the event of your death. Your children will have many different expenses that they rely on you to pay for, child care, college or private school tuition, tutors, camps, as well as the necessities. The right life insurance and plan can assure them these needs will be met after your passing. In fact, you can name them as a beneficiary on the policy if needed.

5 ) Employer benefit life insurance is not enough

There are many ways to determine what your life insurance should cover, a basic rule-of-thumb experts recommend is to have at least one year of your salary, any debts, and a year’s worth of expenses for your family covered. This is much less than most employer-based life insurance policies. In fact, employer policies typically only cover one year of your present salary. Certainly, it will be helpful, but it’s not enough to cover the full spectrum of needs of your family or beneficiaries will have after your death. Buying additional coverage can help cover this gap in your life insurance coverage.

Which policy is right for you?

When you set out to research the right life insurance policy, you’ll discover that there are many types of life insurance. The most common policies purchased are term and permanent or whole life insurance. There are differences between the two options:

  • Term life insurance: This type of life insurance provides coverage for a set number of years, and then no longer covers you. The policy is intended for death benefits only, so none of the premiums develop a cash value, and you don’t get any of the premiums returned after the term expires. However, if you die during the term, your beneficiaries will receive the death benefit in a lump sum payment. Term life insurance is generally less expensive when compared to whole life. Its costs make it a popular choice with younger people.
  • Whole life or permanent insurance:  This type of policy covers you for your whole life. Whole life insurance comes in many different varieties, like traditional whole life, variable life, and universal life, as well as variations within each type. Generally, the death benefit and premium amount will remain the same throughout the life of the policy. However, permanent life policies have options that extend their usefulness in financial planning, like cash values, loans, and how premiums are paid.

There are resources available for you to research these policies online, and you should. However, it’s advised that you work with a financial advisor or wealth manager to ensure that you choose the right policy for your needs, goals, and budget.

The bottom line

Many of the reasons for buying life insurance are the same for young people as older shoppers. That is true. What makes it important to consider making life insurance your first purchase is that the premiums are much lower when you’re young. It, therefore, opens up more options and greater flexibility to develop your goals. A good life insurance agent or financial planner can help you work through the choices, insurance carriers, products, and buying your life insurance

If you’re still thinking through your options, you can contact us at (877)334-7646 or you can get a free online life insurance quote to simply compare premiums.

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