Episode 68 – Why Young People need Life Insurance

Why Young People need Life Insurance by Astra Financial

Life insurance is a necessary part of financial planning—no matter your age. But it’s not always easy to understand what benefits can be gained from paying into a life insurance policy from a young age.

In this episode, I discuss the three benefits of purchasing life insurance for your young family members now and how this can help them in the long run when they start aging.

If you’ve been putting off getting your children or grandchildren life insurance because it seems like a hassle or something that only older people have to worry about, I hope this episode helps change your mind. Listen today


Show Notes:


Hey there. Welcome back. 

This is episode number 68. So as a young adult starting out in the world, I guarantee that the last thing I thought about was life insurance. By the time I did purchase my life insurance, it was almost double the cost I would’ve paid if I had started years earlier.  Often we want and need life insurance many years after the cost is affordable. 

Does life insurance for young people even make sense? I am a hard sell on life insurance that has a purpose and a why and a risk that it’s covering. But does it make sense for young people? Yes. That is a huge, yes. Exclamation point here. You do not need a spouse, children or home ownership to reap the benefits of affordable life insurance.

Now I’m not suggesting that you blindly purchase it. There are many different products and it can be costly. They’re complicated. It needs to be a well-informed decision that fits your cash flow plan and has a purpose. As a parent of young 20-year-olds, I am willing to pay the $ 20-a-month cost for each of their life insurance policies.

I know they’re young. What do they need it for? I’m gonna share today some of the reasons why it’s a cheap gift that they’ll appreciate and thank me later for when  I’ve locked in that price until they’re age 65. So they’re not gonna have a whole bunch of price increases. 

I had a meeting last week with a financial planning client. So we’re putting together a plan. It’s a fee for service. I haven’t worked with them before, so I’m learning their story and they had term insurance renewing every 10 years. They’re 52 years old. They still need life insurance to cover the mortgage debt. Now that’s a whole other topic in a rant I can share with you about why having your own personal life insurance Is better and cheaper than mortgage life insurance. 

So they did the right thing. They checked the box off. They have their own personal insurance, but it was renewing and next year it renews at an awful price of over $200 a month because there’s this step ladder and it keeps increasing. Yikes. The best gift to the young people you love is cheap life insurance.

They’ll thank you when they’re in their forties and have their health because it might decrease and, or they’re older and they never have to have that price increase. So let me share three reasons why young people should have life insurance. 

Number one, you want to pay as little as possible for the long term. The younger and healthier you are the cheaper the policy payments will be. 

Insurance is based on health and age. You are an actuarial number and therefore the cost rises the longer you wait, you’ll wanna lock in your cheaper payments while you’re in good health, because it’s a contract upfront. They’ll ask you questions about your health and, you know, it’ll feel a little, maybe invasive, maybe a blood or urine test. 

But after that, they can’t question it. They’re using that contract at that time. You can’t lie. You tell the truth. Then you’re gonna have it forever. Even if your health down the road decreases. So that’s number one, you have it for the long term and it’s cheap. 

Number two, do you want to protect your ability to purchase insurance in the future?

I know it might be impossible to conceptualize our future self aging. I remember being 20 thinking, “I’ll never be 40”. Well, here I am with a possibly declining heart. Remember when you can’t even think about, you know, one day you might have high cholesterol, especially while you’re eating the nuts and the chips.

Can’t imagine lots of things can happen over a span of 20 years, and it’s important to secure options for our future financial selves. For example, imagine you’ve purchased insurance young and with no medical conditions. And in 10 years time, you develop high blood pressure, diabetes, or a more serious medical condition-  by purchasing at a young age, your payments will not increase.

You’ve locked in your current good health for future pricing and you will not be declined coverage. You know, it is quite common in my office that we don’t actually start thinking that we need life insurance until our forties and fifties. And by then it is so expensive that we have to really analyze whether or not it’s worth it.

So number three reason- You can convert cheaper insurance to a permanent policy down the road. Once you purchase an affordable term life insurance policy, you know, to age 65 or longer, you can convert it later on to something permanent without having to complete the medical questionnaire. 

 So I always say, first, you fill your RRSP, then you fill your tax free savings account. Then you spill over into non-registered savings. And once you’re swimming in it and you filled all these buckets and you’re like, “I feel like I can save more, where do I put it?” 

Then you can start looking at this permanent policy. You become financially stronger or there’s an inheritance. You can then start investment savings inside an insurance policy. It gets a little bit, I mean, it sounds complicated. It’s not, but really all you need to know is first fill all those other buckets up because this is more of a wealth strategy.

It’s expensive, but it serves as a more long-term solution for financial planning. First thing, your biggest takeaway, those three reasons: the first thing buy cheap insurance, while you are young, you have left the door open for you to explore all of these options, you know, a permanent policy, not increasing, whatever it is without having to worry about your health changing.

So I know it seems kind of odd. I am a hard sell on insurance, but just remember the younger you are, the longer you can lock it in, the cheaper it is. This is my gift to my daughters. I know that they will not appreciate this until they are older and in their forties or fifties, and I’ve done this for them.

And right now I have no problem paying it. It’s 20-something a month for each of them, for their term policies. So if you are a grandparent and you’re thinking of what could I get them? I mean, of course there’s some communication with a family because you don’t just all of a sudden hand them a policy because there’s gonna be some questions and health questions, but….good idea to start.

If you’re a parent of a young person the best thing we can do is think about their future self for them right now. Maybe cover that cheap cost and they’ll thank you later.

That’s it? Any questions? Send me a note. Talk soon.