Life insurance will never be cheaper than it is in your 20s. But many people in their 20s don’t need life insurance.
If nobody depends on you financially, or you do not have large amounts of debt, then it may not be the best use of your money.
However, if you do have financial dependents or college loan debt, life insurance is a way to protect them financially, which you will hopefully never have to use.
Table of Contents:
- Life Insurance at 20
- Pros of Life Insurance at 20
- Best Policies for 20 Year Olds
- Best Companies for 20 Year Olds
- Find the Best for You
What You Should Know About Life Insurance at Age 20
It doesn’t get cheaper than this. Buying life insurance is like planting trees, yesterday was better. Today is the next best day.
Life insurance is a gift to people you care about who financially depend on you. If you aren’t married and don’t have children, make sure there is a financial reason to buy life insurance. Otherwise, it can take away from something like retirement contributions which are also super important in your 20s.
A spouse or children is an excellent reason to buy life insurance. From there, you can choose the type of life insurance that best fits your family situation.
What you pay for life insurance will be based on a handful of factors. The three big ones are your age, your biological sex, and your health. You can’t do much about the first two. At least with your age, if you need life insurance, you can save yourself some money by not procrastinating on it. Health is tricky.
Each company rates health differently. Company Y will have a different cut-off limit for height/weight ratios than Company Z. The same thing happens with pre-existing medical conditions. So the trick becomes finding the company with the best underwriting guidelines for you.
Pros to Getting Life Insurance In Your 20s
It’s cheaper. That’s the big one, but it covers several reasons in addition to age.
Locking in Lower Rates
First, by purchasing life insurance as young as possible when you need it, you lock in the lowest rates. The younger you are the lower your life insurance rates. It’s easy as that.
The more time between your current age and the average life expectancy, the lower your chances of dying of natural causes. Even if you’re getting permanent life insurance, the insurance company has more time to try and invest that money to make up for what they will pay your beneficiary upon your passing.
Fewer Health Issues
Everybody knows that as you age, health problems tend to start cropping up. Things that are unlikely in your 20s become standard in your 50s. Not only do health issue begin to pop up, but weight tends to start creeping on as well without a conscious effort to exercise and eat right.
Your health and your BMI are two of the fastest ways to increase your rates. Many times there is nothing you can do about health issues. Even weight gain can be difficult to control if there are associated health issues or genetic predisposition. But life insurance companies don’t care about that. They are only interested in your expected lifespan.
By getting insurance before health issues start appearing, you can lock in rates at a better health class.
Cheaper to Convert or Renew Your Policy Later
If you buy a 30-year term life insurance policy in your 20s, you may still have reason to keep a life insurance policy when it expires in your 50s.
The difference in premium prices between 24 and 29 is not huge compared to the difference in premiums between 54 and 59.
This is doubly true if you decide in your 40s or 50s that you need permanent life insurance policies which can easily be 10x the cost of a term policy at the same age.
Best Life Insurance Policies for 20 Year Olds
This will depend on your income and family situation. If you can afford a permanent policy and have good reason to expect that you will need one in 50 years, it’d be cheapest to buy it now.
But if you are still building up your career, have a young family, and disposable income is a laughable thought, a term policy might be better for you.
Term Life Insurance
Term life insurance lasts for a set number of years, known as a term. So when you look at a policy that says “30-year term” that means the policy will expire 30 years after the start date.
Term life insurance is best for situations that will also have an end date. Mortgages end. Children become self-sufficient. Spouses retire. Those types of things. Most people in their 20s are buying life insurance to cover minor children to adulthood, either 18 or college completion.
It’s the least expensive type of traditional life insurance policy. There are no extra components that cost extra money. Term is simple.
You can add extra provisions, called riders. Waiver of premium means you won’t have to pay your premiums if you’re disabled. Return of premium means that if you outlive your term policy, the insurance company returns most or all of your premiums. Child rider will cover a child if anything happens to him or her.
Permanent Life Insurance
Permanent life insurance lasts your lifetime. Although you will see many policies with maturity dates of 105, 115, or 121. But since most people can’t reach those ages yet, permanent life insurance is still an apt name.
In addition to the death benefit on the policy, permanent life insurance has a cash value accumulation portion. It’s an additional component which accumulates as you pay your premiums, then grows slowly on its own. You can borrow against the cash value accumulation of your policy with extremely low interest.
The cash value components of different types of permanent life insurance policies have slight variations. Whole life has a more stable growth rate than an indexed universal life policy. You can make all sorts of customizations depending on your needs.
Permanent life insurance is best for people with more discretionary income who expect to have a moderate estate when they pass on.
Best Life Insurance Companies For 20 Year Olds
These are the top life insurance companies for people in their 20s.
Remember, the best company for you may vary depending on your medical history and the company’s underwriting guidelines.
We picked these 5 based on their general underwriting guidelines working well for most people.
Also, we took into account their claims history, financial strength, and affordability.
Foresters holds an A from A.M. Best for their financial stability.
They offer some of the lowest whole life rates you can find. Their term policies are also extremely competitive.
Protective shines in the lower benefit levels across all term lengths.
They take remarkably good care of their customers and have an A+ from A.M. Best.
Transamerica offers remarkably low rates for women compared to its peers.
They also earned an A+ from A.M. Best for superior financial strength.
If you are looking for high benefit amounts, AIG has you covered for an affordable rate.
A.M. Best gives them an A for excellent financial strength.
One of the great things SBLI does is that they offer no-exam policies for almost the same price as many companies provide fully underwritten policies.
If you want a policy that will allow you to skip the medical exam, consider them. They also have an A- from A.M. Best.
Finding Life Insurance at Age 20
If you want to pay as little for life insurance as possible, buy it in your 20s.
To save as much money as possible, keep in mind your reasons for buying life insurance and exactly how much you need.
That way you won’t be tempted to buy too much or cut corners and buy too little.