If you’re in your 20s or 30s, life insurance might not be something you’ve thought about. But the reality is that securing a life insurance policy while you’re young and healthy might be one of the smartest and most cost-effective decisions you can make to help secure your financial future.
The amount of life insurance you need depends on your unique personal and financial situation. For example, if you’re single, debt-free, and without dependents, you might not need as much coverage as someone who is married with young children and a mortgage. A life insurance calculator is one of the best tools to help you quickly estimate the life insurance coverage amount that’s right for you. The below four questions can also help get you started with figuring out how much life insurance you might need as a young adult.
1. Who depends on your financial support?
Life insurance is meant to help protect your loved ones and provide for them financially if you’re no longer able to do so. As you think about those loved ones who depend on you, a partner or children are likely at the top of your mind. But there may be other family members that you’re either wholly or partially responsible for helping support.
For example, maybe you have an aging parent who is going to move into a nursing home in the next few years, and you’ve agreed to pay a certain percentage of the cost when that day comes. Factoring this amount into your life insurance policy means you can still help support that goal, even if you’re not around.
List all the individuals who rely on you financially and estimate the amount you would want each of them to receive after your passing. Adding up all these financial obligations can help you understand the policy size you may need.
2. Do you have any debts?
Certain debts, like federal student loans, will be forgiven if you pass away. However, others may be paid out from your estate or fall on the shoulders of a co-signer. It’s important to get a life insurance policy that would help cover those debts so the burden doesn’t shift to a loved one.
Write down all your debts that you would want to cover so your loved ones won’t have to worry. Be sure to include your mortgage, auto loans, private student loans, credit card debt, and medical debt.
3. How long do you need coverage for?
A term life insurance policy is issued for a specific period, often between 10 and 30 years. It will pay out a set death benefit to your beneficiaries if you pass away while the policy is active. A whole life insurance policy, on the other hand, is issued for a lifetime until you pass away, meaning coverage doesn’t end unless you stop paying premiums.
In addition to lifetime coverage, a whole life policy also has the ability to accrue cash value. A cash value life insurance policy tends to be more expensive than term life coverage, since part of your premium payments go toward the death benefit and administrative expenses while another portion builds up the cash value account. Weighing the pros and cons between term and whole life policies can help you make an informed decision about which policy length is right for you.
4. What is your budget for life insurance?
Since you may be building your career in your 20s and 30s and earning less than you will in later decades, the cost of a policy may influence the amount of life insurance coverage you get. A tighter budget may mean opting for a shorter-term life insurance policy with a lower coverage limit rather than a longer-term policy or permanent life insurance with a usually higher death benefit.
However, keep in mind that you can always update your policy or get a new one as your life and financial circumstances change. Even if you can only afford a smaller 10-year life insurance policy in your 20s or 30s, you can up your coverage in your 40s as your paycheck and financial responsibilities increase.
The bottom line
The answers to questions about your debt and financial obligations can help you determine the right life insurance amount for you as a young adult. Online tools, like a life insurance calculator, can help you estimate how much life insurance you need. A life insurance professional is also an excellent resource to help you decide how much coverage may be best.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, Aflac coverage is underwritten by American Family Life Assurance Company of New York.
Aflac life plans – 68000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. 65000 series: In Virginia, Policies ICC0965JTO & ICC0965JWO. B61000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B61JWO & ICC18B61JTO. In Delaware, Policies B61JWO, B61JTO. B60000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Q60000 series/Whole: In Arkansas & Delaware, Policy Q60100M. In Idaho, Policy Q60100MID. In Oklahoma, Policy Q60100MOK. Not available in Virginia. Q60000 series/Term: In Delaware, Policies Q60200CM. In Arkansas, Idaho, Oklahoma, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C. Not available in Virginia.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations, and exclusions.
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Aflac New York | 22 Corporate Woods Boulevard, Suite 2 | Albany, NY 12211
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