As someone in their late 20s, I have a lot of the financial struggles and priorities that other 20somethings and millennials have.
I’m paying down student loan debt. I bought a house and I’m working through paying that down and making needed updates and changes (none of which are cheap). I’m investing and saving for retirement. All of this and trying to balance travel with my other financial goals.
Regardless of your age, you’re likely in the same boat as me: there are multiple financial priorities fighting for your paycheck.
Why then did I decide to take on another financial burden and get a million dollar life insurance policy at 27?
Despite the endless list of things I could use my money for, I have meant to get life insurance for a few years now. Here’s a few reasons why I did it.
Because I’m Married
The main reason most people get life insurance is because they are married and/or have children. When you are married or are in a serious relationship there is someone else who is making financial decisions based on your current and future income. And when you have children they are obviously relying on your income to support them.
While my wife and I both work and plan on being a dual-income household even when we eventually have kids, it’s clear that the decisions we make are based on both of us bringing in money. From the house we bought to the decision to live where we are, it’s all joint decision making. There are clearly financial implications of these decisions.
I was also greatly influenced during college by Suze Orman’s book The Money Book for the Young, Fabulous & Broke. She argued that you have no idea how your significant other will react to a premature death, nor will you know how you will react. I know we all like to think we’d make it out just fine, but in reality it can have a deep impact on your life. It could derail your career and force you to take an extended time off from work, which just makes it more difficult to get back to where you were income-wise.
Her suggestion is to take out more than you think you would need. For our situation, a million dollars is clearly more than we need. But it allows us to know that if the unthinkable happened, finances would be the last thing we have to worry about.
Get your free life insurance quote from Policy Genius.
Because I have Debt
Both my wife and I have undergrad student loans that we are paying off, and my wife is in grad school. Beyond that we have a mortgage. This all adds up to a sizable amount of debt that we are paying off jointly, with the assumption that we both will be working to pay it off.
I get it. When you have debt, you want to pay it off as quickly as possible. Having an extra payment for an insurance policy does not help that cause. But what if your significant other passes away unexpectedly? You have to face the reality that all the debt would fall on your plate.
This goes back to my other point that the last thing you want to deal with when you have a loved one pass away unexpectedly is money. Having a life insurance policy – especially one that is worth a million dollars or more, can take that completely out of the equation. Debts can be paid off, and then some, to allow you to cope with the loss without having the burden of debt weigh over you.
Because I Can Lock in a Rate Now
One reason I refuse to pay more than the minimum on my mortgage is because of the incredible interest rate we have: 3.25%. Stocks are *almost* guaranteed to beat 3.25% over the course of thirty years, perhaps by a wide margin. It’s pretty awesome that we have the ability to lock in that interest rate for such a long time period.
Life insurance to a great extent is based on your health history. The younger and healthier you are, the less risk you are to those underwriting the policy. Locking in your rate in your 20s or early 30s can be a good way to ensure you are paying the lowest possible premiums over the next couple of decades.
These are my reasons for signing up for a million dollar life insurance policy at a relatively young age. If this has piqued your interest and you want to see what life insurance would cost you, read on as I describe how I got my policy.
How I Got My Life Insurance Policy – and How You Can Too
It’s probably worth an entire separate post explaining the life insurance process and exactly how easy or difficult it was, but it’s worth mentioning at a high level how I went about getting my life insurance policy.
One thing many people know about me is that I hate having to actually talk to someone on the phone if it can be avoided. Life insurance is something where I don’t want to sit on the phone with someone providing information that could be more easily entered online.
I got my online price quotes through PolicyGenius. PolicyGenius collects a small amount of information about you and instantly shows you quotes from various insurance companies. What I liked about this is I didn’t have to meet with someone in-person who sells policies, nor did I have to talk to someone on the phone. It was done entirely online.
Getting quotes through Policy Genius is an easy way to see what life insurance may cost you with no commitment.
Get your free life insurance quote from Policy Genius.
I think it’s smart to lock in your policy early. The earlier you buy and the healthier you are, the cheaper it is! The first policies we bought in our mid-20’s are absolutely dirt cheap and won’t expire until we are 55 anyway.
Nice job locking in at your 20s! I think it’s the way to go. I realize there are other financial priorities in my life (and I’m sure everyone else’s life!) but it just made a lot of sense long-term.
We have life insurance, but we haven’t updated it since we got it 6 years ago after my daughter was born. We got EXCELLENT rates by getting it so young, we were 25 and 27 at the time. I wonder how much the price would increase if we upped it by another $100,000 grand or so now…I may have to look into it. You’re right, we don’t know how we would react and it’s better to have more than enough than not have enough. Oh and BTW, I just love your newsletter format (so random, I know, lol)
Latoya – thank you so much for the feedback on the newsletter! I’ve been spending more time on it lately and it’s so nice to get feedback on it – and positive feedback at that!
Nice job getting life insurance! I’m kind of in the set-it-and-forget it mindset so even if I got kids I likely wouldn’t up my life insurance, so I can’t really blame you for not updating it for some time now.
I think you made an excellent decision and explained your reasoning really well. I’m single with no dependents, so it doesn’t make sense for me to get life insurance at this point.
Yes as a single person it rarely makes sense unless you have a sibling, parent, etc. that depends on you. Thanks for the feedback on my decision!
Exactly right if a spouse or kids are in the picture, life insurance should be a priority. And it is pretty cheap. I chose to pay for the whole year on my own life insurance and it came out to $390. That’s much less than my car insurance, health insurance and even my homeowner’s insurance. Almost a no-brainer.
I also prefer not talking to a person if I can do something online. I used a different company but it worked out well and I was able to get the policy fully in place in just about 3 weeks after my online application.
Technology is awesome!
Hmm $390 is less than your health insurance for the whole year??? That’s either a really great policy or you have a massive deductible. But back on topic haha I also paid the full year at once. The fact that you pay less by paying it all at once versus monthly, twice a year, etc. was what made the difference for me.
Locking in early is a smart thing to do. Now that I’m in my 60’s, I still have life insurance but not as much as I’d like because it’s so expensive for my age and health.
I hear you, Gary, and these are good words for those who are a bit younger and on the fence about locking in now. I also like the fact that I’m locked in and don’t really have to think about it again.
Completely agreed on the importance of life insurance when you start throwing some of those variables into the equation. I worked in life insurance for 5 years and saw way too many situations where someone passed away unexpectedly and there was little to no life insurance leaving the surviving family members in the cold. We both have coverage and have added to it with each child and with the growing of our business.
Good words, John! It’s kind of a catch-22 in the sense that you want to pay down debt, but BECAUSE you have debt you also want to make sure you have some sort of life insurance…but paying for said life insurance takes away from other goals. I ultimately feel better knowing that I have that financial protection in a worst case scenario.
I waited until my early 30s, though I doubt it’d have made a huge difference in rates since I was already diagnosed with my various ailments by my early 20s.
I’d love to have a larger policy, but right now it’s $52 a month just for $125,000. But it’s enough to pay off the mortgage and still have about $50,000 leftover if I died tomorrow. We also have a few thousand in various savings accounts (at least, that’s all that will be left after this last step of the dental implants process) and hopefully, we’ll have built that back up too in the next year or so.
Life insurance is especially critical for him because he’s on disability — and that’s currently being contested. So while the policy isn’t huge, it’d give Tim a little breathing room — and he’s been instructed to get roommates to supplement his income.
It was smart to lock in a good rate now. I encourage anyone even *thinking* about a family, whether that’s just a spouse or if kids will come into the picture, to do the same.
Yes that does provide some needed breathing room in a worst case scenario. I think you are in a tough spot since you don’t want to be paying $100-$200/month on life insurance just to provide a little more breathing room.
I get wanting to lock in the rate, but not having children or a spouse or anyone dependent on me in any way, I have trouble justifying life insurance for myself.
Totally understand where you are coming from. I do not think life insurance is necessary if you do not have children or a spouse, but there are unique cases where you may want to consider it.
I love Suze Orman’s book! I read it cover to cover 2 times a few years back. That was before I knew anything about investing or life insurance policies. I should probably read it again!
It’s a really great book and some of the advice is definitely timeless. I can’t believe it was published nearly a decade(!) ago.
Which life policy did you get? I’m struggling with deciding on which plan to go with since there are so many. Like Whole life or Term?
Great question! I went with term. Whole is often sold as a potential “investment” benefit, but I don’t think it’s the best way to invest your money. Having both your investment and insurance together complicates things and makes it difficult to tell if you are getting a good deal on the investment part – which is probably why insurance salespeople push it so much!
I agree with you. Whole life is more of a rip off than anything. Salespeople push it because i believe they get residual commissions off it I believe, I might be wrong. Have you heard of a term policy that pays you back everything at the end of the term? If so, any thoughts?
I remember you mentioning this for awhile. I’ve been mentioning it for awhile as well but haven’t. I do have a decent amount of term life insurance through work so that is why I haven’t prioritized it. Did you have a policy at work? I know that it’s probably better to get an individual policy since there’s a chance you might leave the employer however I work in government and I’m pretty sure I’ll be staying until retirement.
I have a small term policy through work, about $50k. It’s not even close to what I am comfortable with, though, so that’s why I looked into additional plans through PolicyGenius.
I haven’t looked into life insurance yet because I’m not married. I do know it’s a selfless deed if I have others depending on me and will look and research into this further when I do get married. Thank you for sharing your story!
Yes definitely not needed if you are single and have no one depending on you. But I’m glad it’s on your radar for when you get married!
I think it’s a great idea to have so much in life insurance. My wife and I each have half of what you have in life insurance. I’m wondering if I have enough with two kids under 7, a house, and not wanting my wife to worry about a thing if something ever happens to me. I’m actually healthier now than I was when we bought our policies a few years ago in my late 20’s. I’m going to have to look into our needs and how much more I should buy. Thanks, David!
You didn’t mention that you did reach out to me for a quote, otherwise great editorial.
I think you actually reached out to me unless I’m forgetting : )