Life insurance is not a topic that frequently enters the conversation, particularly if you are below the age of 40. In this opinion piece, I will see if I can change this paradigm.
After all, life in your 20s and 30s still very much feels like the ‘beginning’ of a long process. Sure, you have noticed that you might not be as fit as when you were 18, and perhaps a couple of minor medical issues have cropped up over the years, but the spectre of death does not feel like it looms on the horizon.
Of course, this is something to be cherished. Nobody wishes to be plagued by visions of the end of one’s own life, but this doesn’t mean that we shouldn’t reflect upon this important topic occasionally.
You wouldn’t want to think you missed the opportunity to make a good life choice simply because the topic in question made you feel a bit uncomfortable. Sometimes a bit of discomfort is worthwhile tolerating it means improving your family’s prospects.
Why would a young person buy life cover?
Life cover (term life cover to be specific) is a simple insurance policy which pays a sum to your named benefactors or to your own estate if you pass away during the term of the policy.
An example might be to insure your life for the next twenty years for £400,000.
This type of policy would provide £400,000 in the event of your death over that twenty year period.
Young people are frankly unlikely to meet their end during their 20s and 30s, however it’s still a real possibility. There is roughly speaking a 0.5% – 1% chance that this will unfortunately happen. In these cases, life insurance would be a blessing.
If you think that’s a vanishingly small chance, then I would ask you to reflect upon a thought experiment:
Imagine being handed a 100 sided die. If you roll a 1 – 99, you win a £10,000 prize. If you roll a 100, you die.
Would you play that game?
I’m willing to take a guess that you would not pick up that die, even if the prize sum increased significantly. When it comes to death, even a small percentage is quite a serious matter. Of course, in this case, the impact on you of rolling that 100 is the ultimate price, but the impact upon your loved ones would also be traumatic.
Your partner would lose their other half, your children would lose their parents, and your parents would lose a child. It’s a horrible situation to imagine, and yet there is a 0.5% – 1% chance that this will occur.
If this did happen, and your family lost their source of income overnight. What would happen?
- Would your family need to move house to afford the payments?
- Would your spouse need to get a job / change their job or work more hours to continue to support the children?
- Would your surviving partner need to hire a childminder or nanny to look after the children while they work?
- Would your business survive without you?
- Would your parents need to pay for professional helpers if you are no longer able to visit?
It’s a small chance, but life insurance can help mitigate the issues that your loved ones would suffer if you were to pass away.
A payment of the right amount would mean that all of the above problems would be paid for or avoided entirely.
The great thing is that because the likelihood of you passing away is so low, life insurance between 20 and 40 is very cheap. You can actually find policies for £1m which cost less than £30 per month!
Therefore I hope this article has caused you to pause and reconsider whether life insurance is worth paying for in the younger years of adulthood.