Continuing from my last blog “Building a Strong Financial Foundation,” I'll go more in-depth about life insurance and why it is important to have it in place at a young age. Life insurance is based on your age and health. The younger you are and the healthier you are, the less expensive your premiums will be. Why? Life insurance is based on the risk of you dying. If you apply for life insurance when you are in your 20s, the life insurance company is less likely to consider you a high risk because the chances of you passing away is a lot less than if you were in your 50s or 60s (granted that you are taking care of your health). So how come we don't see many 20 year olds purchasing life insurance?
Reason #1 – Lack of Understanding
Unless you have studied risk management in school or if you have a family member or friend in the financial field, I wouldn't expect you to know everything about life insurance. Just like the same way I don't know much about the engineering field because I didn't study it. However, I generally know some things because that is the field my brother is striving to pursue.
So if it's not for those personal influences, how do people get informed about life insurance? That's where people like myself come in. There are many financial experts out there in our community but the ratio of financial experts to the amount of individuals/families out there is very small. Speaking for myself, I strive to meet with at least three people a day, but even at that I am still not meeting enough people to make a drastic impact in my community. I can only reach so many people in a given time frame. Of course, not all young adults in their early 20s have a stable career just yet so it would be hard to allocate a large sum of their income into these financial buckets. However, that doesn't mean that they can't start off with something small first. It's always better to have something than nothing at all.
Reason #2 – Unaware of the Value of Life Insurance
I've come across many people who don't even know what life insurance is. They somewhat have an idea because they can guess that it's “insurance” on your “life” but what does that really mean? Well, to simplify it, life insurance is intended to be left behind for their beneficiaries (usually for their spouse and kids) so that they can continue to live the same lifestyle that they had before that individual passed away. Life insurance is usually thought of as being used to pay off any debt that was left behind, mortgage, children's education, and of course, funeral expenses. Everyone has a different “human life value” and that's how I determine how much life insurance my clients need.
In my opinion, I think it is imperative that young adults like myself already have a life insurance plan in place. Even though I am not married and I don't have kids yet, I know that soon enough I will be married with kids. I also will have a future home and I know I would want to fully fund my children's education. So if those are all part of my M.A.P. (Master Action Plan), then what better reason should I need to get the life insurance already in place since I don't have many expenses at the moment that I need to worry about. If I create the discipline now to save and put away for those future goals, I won't even feel it once all my future expenses start to take over. Plus, remember, the younger you are and the healthier you are, the more inexpensive your premiums are.
Reason #3 – Lack of Vision and Future Planning
Lock-in your rate and insurability while you still can and you won't have to worry about changes in health later down the road. Most people don't get life insurance until they are already married and have kids because now they realize they need it. But what happens at that time they realize it? They are now older, they probably aren't exactly as physically fit as they used to be so now guess what? Their premiums are much higher. Worst case scenario, they can't get life insurance because now they are uninsurable because of unexpected health factors that they now acquired.
Life is so unpredictable and just because we are young doesn't mean we should put off planning for our future till we get married and have kids. It may seem like we are invincible and nothing can happen to us at this age, but in all reality it happens to many of us. Visit the hospital sometime and talk to some of the young patients there. I'm sure they never would have thought they would end up in the hospital at that age. Always be prepared for the worst no matter how young or old you are and don't ever let procrastination take over your future vision. It's not worth the short-time we have here on this earth. Build that strong foundation for your future and go on and accomplish all of your goals in life with no regrets. Always look forward and never look back.