Life insurance is a big commitment. For millennials, getting a policy is an indication of the rise to adulthood. The realm of life insurance isn’t as complex as it used to be. Yet, it can still seem complicated to those unfamiliar with the buying process, including many millennials.
Here are five tips for millennials to keep in mind when shopping for life insurance.
Tip One: Handle the College Debt
Many millennials are not far removed from college but are still saddled with student loans. These often take years to pay back. When it comes to life insurance, the origins of these loans matter. It’s horrible to say, but just because you die does not take away an existing loan.
If your parents co-signed your student loans, the bank won’t discharge the debt in the event of your (or their) untimely passing. Bank loans co-signed by parents aren’t the same as a federal government student loan. The lender will still want the loan repaid.
With that in mind, it’s a good idea to avoid saddling your parents with your student loan bill. Rather, get life insurance with a death benefit that will pay enough to pay off the loan (plus interest). It will help your parents settle the debt of the existing loan.
Tip Two: Be Careful About Social Fundraising
We live in the age of GoFundMe, Facebook startups and Instagram campaigns. For this reason, it’s important not to get too distracted from traditional income streams. In other words, don’t assume a successful GoFundMe drive will support survivors after your death. These platforms, as well as the IRS, will take a cut of proceeds raised. Thus, relying on these social fundraising sources to help subsidize your life insurance benefits is a risky proposition.
Tip Three: Pick A Policy Sooner, Rather Than Later
It’s easy to get lost in the shopping phase of life insurance. Don’t wait. Pick a policy sooner, rather than later, as policy rates tend to be similar across the board. They also tend to rise the older you get. By obtaining a policy sooner, you’ll secure your financial future and improve your wellbeing over the long-term.
Tip Four: Pick A Comprehensive Policy
It’s a good idea to use a life insurance calculator to figure out how much coverage you need. A comprehensive policy will cover the following:
- Your income
- Your assets
- Your major debts
- Your future obligations
Tip Five: Consider A Term Life Policy
Whole life insurance isn’t a necessity for everyone in every situation. Rather than maxing out benefits with whole life insurance, consider that you may not have access to policy perks, like tax-deferred accounts for a number of years.
If you find the costs for whole life insurance outweigh the benefits, consider a term life policy instead. It can provide you with a tidy sum for your own needs. It can also disappear after a number of years if you feel you no longer need it. At the end of the day, having the right amount of coverage matters.
Contact Clarion Pacific Insurance Services. One of our agents can help you determine which is right for you.