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A Millennial’s Guide to Life Insurance Part 1: Do we even need it?

By: John Kreitzberg & Chaitanya Bala

Shutterstock_345938891Before either of us sat down and really reflected on this question, the idea of buying life insurance had never even crossed our minds. As 23-year-olds just recently out of college, it simply was not on our radar. Financially, our focus has been on maintaining our living situations: making rent, buying groceries, paying for internet and having enough left over for happy hour, a concert ticket, and some takeout when we don’t feel like cooking. Even if we did have money left over after all these expenditures, we would much rather spend it on takeout or leisure than on an insurance policy, where benefits would only show up after we’re gone. But we still see information all over the internet, and articles that keep pushing us millennials to be more serious about life insurance and consider purchasing it. And that’s got us thinking:

What really is the point?

So we’ve finally come to the bottom line. Maybe we millennials could benefit from life insurance right now, but do we really need it? Often these policies are used to protect those financially dependent on us, but honestly, most of us are barely financially independent on our own. We’re probably not expecting to pass away within the next couple decades either. So we don’t really need it, right?

Well…that’s not exactly true. And here’s why:

It Pays off Student Loans

We’re young, we’re in our 20’s, and in typical millennial fashion, we do sometimes think we’re invincible. Because of this, we never really consider what will happen to the mounds of student loans a lot of us are sitting on right now if we were to pass away. If something were to happen to us, it is entirely possible our parents/guardians would be required to take care of any remaining debt left behind if our loan isn’t covered by the death clause, which clears any debt in the event of a death. Although the death clause does protect some from needing to continue paying their loans posthumously, this isn’t the case for all types of loans, and an estimated 67% of that debt may still need to be paid off by your parents/guardians. By purchasing life insurance, we can feel more secure that we’re taking this burden off of our parents/guardians.

It Eases Financial Burdens

While some of us are in a place where covering our expenses wouldn’t be a huge financial burden to our parents/guardians, this isn’t the case for many families. As many as 50 million Americans fall below the poverty line, many of whom belong to a family of four. They struggle financially to support themselves, let alone the entire household. Losing a child for any family is tough enough, but imagine how it would impact a family that really counted on the child to make ends meet. We’re not only talking about emotional distress for families that just lost their child, but probably a huge financial burden for them as well. If something were to happen to you, you’d want to be able to provide my family with something, to give them one less thing to worry about and to allow them to focus on what really matters in such times. After the both of us started absorbing this information, we kind of started having second thoughts. After all the support our parents have given us throughout our lives, we would would want to make sure we can give them something back, and life insurance would allow each of us to do that.

You Might Want a Decent Funeral

Wait what? Why the heck are we even talking about funerals? Again, we’ve just got to reiterate – we millennials are not invincible. No matter how young, healthy, and tough we might be, we’re just as susceptible to death as anyone else. Maybe we might not have as many health problems to worry about as some of our older counterparts, but we’ve got a host of other things to worry about that still make us a high risk generation of individuals. For example – car accidents. There’s a reason our car insurance monthly premiums are way higher than other age groups: because a lot of us text and drive, and end up in (fatal) accidents. With funeral costs ranging from $7,000 to $10,000, assuring your family is able to provide you a decent funeral in case you were to end up in a fatal car crash is no cakewalk. It’s going to take a decent bite out of your savings. While we would never encourage any of you to text and drive, we still need to acknowledge it’s a thing, unfortunately. So let’s not be naïve and pretend it will never happen to us. Let’s be prepared instead.    

It’s More Affordable than You Think

As we were scoping out life insurance policies online, what we found was that a life insurance policy would cost us less monthly than even the cheapest of Chinese takeout, surprisingly. A recent study found that consumers under the age of 25 estimate a life insurance policy to cost $600. In actuality, that number will likely be around $160. That’s less than $15 a month. Of course, the price of any insurance policy depends on many factors, but the point is, even after our typical monthly expenses, holding a life insurance policy doesn’t present nearly as much a financial burden as we had originally thought. And to think that dishing out less than a couple hundred dollars a month can provide someone a lifetime of peace by helping them pay off their loans, support their family, and actually have a decent funeral service seems like a pretty decent tradeoff.

In our next blog, we’re going to talk about the different types of life insurance we found. Before we got this assignment, we thought there was only one kind. Who knew?

Want to read more? Part 2 of this blog is here

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