About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area, that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual financial planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the The DREAM Financial Planning Process ™ to help our clients achieve their goals.
Millennials live in an innovation-driven economy moving faster than any other generation. We can't predict the future, but we can prepare and manage it with Life Insurance. It serves several purposes — all intended to build, provide for, and protect the future financially.
Buying Life Insurance during the early adult years offers several advantages. It's likely that many haven't a clue how Life Insurance works. And even fewer realize Life Insurance is an investment of themselves to be used against whatever life throws in their path — making the age of twenties and thirties ideal to purchase a Life Insurance policy.
Term Life vs. Whole Life Insurance
As a Fee-Only Financial Planning firm in the Washington D.C. area, we don't ever charge commissions or sell Life Insurance. However, we are qualified to help you analyze the best coverage for you and your family. The majority of the time, we recommend Term Life Insurance as the most cost-effective way to get coverage that doesn't have hidden fees. We usually recommend that our clients stay away from Whole Life Insurance and Annuities. Before you buy insurance, make sure you're working with a Fiduciary and ask about the agent's fees and commissions, which are often very high or hidden for Whole Life Insurance products and Annuities.
Reason 1: Life Phasing Polices
As millennials focus on seizing new opportunities for education and careers — there's little interest in Life Insurance. Granted, most see Life Insurance as a method of paying debt in the event of a life tragedy or family misfortune.
It's really about managing change accompanied with financial responsibilities.
Reason 2: Employer's Insurance
Millennial or not, it's essential to take the time to read your employee benefits. Take a close look at the features offered in the life insurance policy and ask questions if you're unsure about anything. Most employers will not offer a standard plan with an option for additional coverage, but the majority of companies have limited coverage.
In the event, an injury prevents you from working — an employer's policy may not cover your financial needs. In this case, you may need to secure independent coverage. Besides, having independent coverage will provide you with continuous protection should the employer go out of business, you change jobs, or you get laid off.
Reason 3: Cost and Benefits
Premiums are calculated based on the applicant's age. A good health status translates into less risk, which typically reduces the premium.
If you are suffering from a health disorder, it's a good idea to talk with an agent and get specific information on the features you need or should consider in the future. If diagnosed down the road with a severe health condition, the policy remains active.
Reason 4: Know Your Needs
Determine how much coverage you need. Research the different types of policies along with an insurer and look for the insurer's rating. It's an industry rating, verifying the financial strength and the ability to pay the policy claims.
Life is full of surprises for young adults and their children, some of which can cause serious injuries. So it's also essential to ask about riders for long-term healthcare or disabilities. These policies can help cover the financial expenses.
Reason 5: Take Care of Business
As you accumulate assets and begin to raise your family, it's essential to secure a backup plan using the life insurance features for paying day-to-day bills for childcare and family expenses. It's an affordable method of providing for your family when you can't.
- Choose between the two major types of life insurance: term or whole life.
- Term insurance pays a death benefit (sole provision) as long as the policy is in force, whereas term policies can range up to 30 years.
- Whole life pays a death benefit and offers three plans — whole traditional life, universal life, and variable universal life.
Reason 6: Plan, Plan and More Planning
Most of us know about life insurance payouts for injuries, death, and beneficiaries. Whole life policies also have a savings program — earning interest and building equity. Provisions vary from company to company. It's worth the time to learn about this component. Portions of the policy earnings are tax-free, accumulating a cash-value over time.
With a sufficient cash value, you can borrow against it or use it to pay the insurance premium during early retirement, keeping the policy intact. This is a valuable financial resource for young adults.
There are so many unanswered questions about Life Insurance. Please feel free to contact us if you'd like to learn how Life Insurance can provide peace of mind for your family, and make sure you're not paying too much for coverage. If you have any further questions feel free to contact us for a
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Disclaimer: Dream Financial Planning, LLC does not warrant that this information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Dream Financial Planning, LLC be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Dream Financial Planning, LLC or a Dream Financial Planning, LLC authorized representative has been advised of the possibility of such damages. Please consult with your own advisor before making any changes to your Financial Plan, Investments, or Insurance coverage.